The Effect of Economic Growth on the Stock Returns of Iranian Listed Banks, with Emphasis on Endogenous Money Supply

Shahriar Montazeri; Seyyed Abbas  Hosseini Ghaffar; Negin  Zarir Taji

Authors

Shahriar Montazeri Instructor, Department of Economics and Management Accounting, Payame Noor University, Iran https://orcid.org/0009-0000-3515-266X
Seyyed Abbas Hosseini Ghaffar Assistant Professor, Department of Economics, Ashrafi Isfahani University, Isfahan, Iran Author https://orcid.org/0000-0002-6272-7585
Negin Zarir Taji Assistant Professor, Department of Economics and Political Science, Shahid Beheshti University, Tehran, Iran Author https://orcid.org/0009-0002-5843-8403

Keywords:

stock returns, endogenous money supply, economic growth, Panel Smooth Transition Regression (PSTR) approach

Abstract

The endogeneity of the money supply means that the money supply is determined by internal factors within the economy. This study tests the Post-Keynesian theory concerning the stock returns of Iranian listed banks. In the first model, endogenous money supply is used as the threshold variable, whereas in the second model, endogenous money supply and economic growth are employed as threshold variables. Using panel data from 14 Iranian listed banks during the 2013–2024 period, this study examines the effects of endogenous money supply and economic growth on stock returns through the Panel Smooth Transition Regression (PSTR) approach. The threshold variables of endogenous money supply and economic growth have nonlinear relationships with stock returns. The findings indicate that, in the endogenous money supply threshold model, neither the direction nor the intensity of the effect of endogenous money supply on stock returns changes in the upper regime. In other words, when a regime transition occurs, the effect of endogenous money supply remains positive in the upper regime. In the second model, which uses endogenous money supply and economic growth as threshold variables, economic growth has a positive effect on the stock returns of listed banks in the upper regime. The findings recommend the adoption of robust policies aimed at promoting economic growth and sustainable development for economic stakeholders.

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