The spillover effects of uncertainty in Iran's economy

When there is uncertainty in the macroeconomics, it causes costs for the government, for example, if there is uncertainty in one of the uncertainty indicators (growth, inflation, exchange rate, exchange rate, stock value) There is a market. This research seeks to investigate the effects of the outbreak of uncertainty in Iran's economy. One of the defects of GARCH (p,q) family models is that positive and negative fluctuations with equal size (equal absolute value) have the same effect on the conditional covariance matrix, this feature is the symmetry effect. But in practice, the reaction of the economy to good and bad events may be different. In this research, to solve this problem, modeling based on the of GARCH family and GARCH non-linear combination models with BEKK extension have been used.The estimation of the coefficients of the ARCH section using the Ax and Ay matrices shows the transfer rate of the impulses of the endogenous and exogenous variables of the model from one section to another, which is known as the spillover effect.

Based on the accuracy measurement criteria of the modellings, VARMAX GARCH-in-Mean Asymmetric BEKK model (VARMAX GARCH-in-Mean Asymmetric BEKK model will be renamed to VARMAX GARCH-in-mean BEKK model with regard to exogenous variables.) In terms of structural failure, it has provided more accurate results; Therefore, the estimation results of the above model are used as the final model for the analysis. Considering that the number of conditional mean and conditional variance-covariance equations depends on the number of endogenous variables; In the current research (due to the presence of three endogenous variables), three equations for the mean part and three equations for the variance-covariance part have been designed.

Several studies confirm the spillover effects of the oil sector to other macroeconomic sectors, so that the impulses and fluctuations of one market spread to other sectors of the economy and cause fluctuations in these sectors (Trujillo Barrera, Mallory and Garcia, 2012); To identify and analyze these effects, the coefficients of the ARCH part of the studied model are used. The estimated coefficients of the Ay matrix indicate the contagion of the impulses overflow among the endogenous variables of the model and the estimated coefficients of the Ax matrix indicate the contagion of the impulses overflow from the exogenous variables to the endogenous variables of the model. Based on the obtained results, most of the estimated coefficients of the Ay matrix are significant for the spillover of impulses and turbulence between the stock market, currency and gross domestic product (except from the production sector towards the currency market). Also, based on the coefficients of the Ax matrix, the greatest effect of oil impulses spillover is transferred to the production sector (0.184). This means that the production sector is more vulnerable to oil price shocks than the other two studied sectors (currency and stock markets).

By using the coefficients estimated in the GARCH section, one can see the effects of the past period turbulence of a variable on the current period turbulence of the same variable (inside effects) and other variables (mutual effects). In the GARCH effects section, the estimated coefficients included in the By and Bx matrices respectively indicate the impact of the turbulence (uncertainty) created in the past period (t-1) on the current period turbulence of the endogenous and exogenous variables of the model. By examining the significance of the coefficients of the By matrix, it can be found that during the study period, according to parameter 2 (0.505), the most transfer of turbulence from the previous period of the foreign exchange market to the current period has occurred in the foreign exchange market. Also, in the analysis of the GARCH effects of exogenous variables and the estimated coefficients of Bx matrix, it can be seen that the transfer of oil price uncertainty to real GDP (-2.055) and currency market (-0.724) is significant. In addition, the transfer of the turbulence resulting from the embargo to the foreign exchange market ((-0.153)) has also been confirmed. The estimated coefficients of Dy and Dx matrices are, respectively, the asymmetric effects of bad news due to the creation of uncertainty by the endogenous and exogenous variables of the model. As mentioned in the previous sections; The high significance of all the estimated coefficients of the matrix of Dx coefficients indicates the confirmation of the existence of asymmetric effects of BEKK in the studied variables. Also, a detailed examination of the estimated coefficients shows that the reflection of bad oil news on the turbulence of the production sector ((-0.033)) and the bad news of sanctions on the turbulence of the stock market ((-0.311)) are more than the other studied sectors. has appeared