Investigating the long-term effects of compound risk and economic complexity on sukuk market development in Iran (Nonlinear Autoregressive Distributed Lag Model Approach)

Investigating the long-term effects of compound risk and economic complexity on sukuk market development in Iran (Nonlinear Autoregressive Distributed Lag Model Approach)
Authors:

1 Ph.D. Department of Economics, Islamic Azad University, Zanjan Branch, Zanjan, Iran

2 Assistant Prof., Department of Economics, Islamic Azad University, Zanjan Branch, Zanjan, Iran.

3 Associate Prof., Department of Economics, Kharazmi University, Tehran, Iran.

10.61186/ijf.2024.429303.1447
Publication date:2024/4/1
Journal:Iranian Journal of Finance
Volume:8
Issue:2
Pages:105-130
Publisher:Iran Finance Association
Abstract:
The main objective of this article is to investigate the impact of various financial, economic, and political risks and economic complexity on the development of the Sukuk market in the Iranian economy. The data required to conduct this research based on the variables of the proposed model were used from the Capital Market Central Asset Management Company, the International Country Risk Guide (ICRG) database, and the MIT University website. The data relating to 2010-2022 is seasonal, and REVIEWS 13 software was used. The model estimation results using the Nonlinear Autoregressive Distributed Lag Model Approach (NARDL) show that the negative shock of political risk reduces the development of the Sukuk market in the short and long term. The negative shock of financial risk in the long term has a negative impact on the development of the Sukuk market. The negative shock of economic complexity reduces the development of the Sukuk market in the short term. The positive shocks of political risk, financial risk, economic risk, and economic complexity in the short and long term led to the development of the Sukuk market. Among the three types of risk, political risk and financial risk have the most impact on sukuk market development. The error correction coefficient in this estimate is negative and statistically significant, which shows that 0.42% of the short-term imbalance is adjusted to reach the long-term balance every year.
Keywords: Sukuk, Financial risk, Economic risk, Political risk, Economic
complexity, NARDL.
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