monetary policy and stock market cycles in iran

The present study examines the impact of monetary policy on nominal and real stock returns in iran during bull and bear stock market cycles. estimating the models with a modified version of the hamilton (1989) markov-switching model and by employing the quarterly data spanning from 1991/92 to 2016/17, the results indicate that an expansionary monetary policy has a positive and statistically significant impact on stock returns only in bear regimes in line with the prediction of models with financial restrictions. by employing time-varying transition probability markov-switching models the findings also indicate that an easy monetary policy increases the probability of remaining in a bull regime while reduces the probability of being trapped in a bear one.