2025/07/16 by Irina Kalina, Kazi Sohag
Economics, Econometrics and Finance · #Market Dynamics and Volatility #Economic Sanctions and International Relations #Natural Resources and Economic Development
paper · doi:10.1080/00036846.2025.2532891
We construct a comprehensive financial stress index (FSI) by leveraging all available time-series data for the Iranian economy, which has long contended with extensive financial and non-financial sanctions. To this end, we measure the dynamic response of this devised FSI to different exogenous shocks including expected and unexpected changes in oil price and production, well as Middle-East geopolitical crisis over Nov. 1997 to Dec. 2023 considering quantile and time frequency connected approaches. We find that the Iranian financial market is relatively more sensitive to changes in oil price than oil production shocks. Besides, the Iranian financial market is exposed with the hike of geopolitical events concerning Turkey and Israel, while it is less responsive to those events concerning Egypt and Saudi Arabia. Besides, Iranian financial market demonstrates resilience to oil price shocks before 2008. We also find that outbreak of COVID-19 or the escalation of the conflict between Russia and Ukraine did not cause financial stress in the Iranian financial market.