Examining the Effect of Uncertainty in Monetary and Fiscal Policy on Capital Markets

Capital market has the major and determining role in the collecting and guiding recourses to the Essential economic activities in the all of countries .It is not possible to collect funds from members of the public, without these markets. It is believed that the prices in the stock market by some macroeconomic variables are determined.With this approach, with regard to the capital asset pricing model, arbitrage model and the government's role in stabilizing the economy, in the present Study the response of the stock market from unanticipated changes in monetary and fiscal policies during 1370-92 has been modeled. To reach this goal, monetary and fiscal policy shocks in model GARCH was modeled . Then using the ARDL model provided Pesaran et al (2001), the effects of monetary and fiscal policy shocks on the stock exchange along with variables such as inflation, liquidity, interest rates, market exchange rate and oil income were examined .According to results 10% unforeseen changes in the monetary policy reduce the stock price indicator amount of 3.6 and 4.7 percent in the short term and long term. The results show that both inflation and liquidity have positive effect on the stock exchange in short-term and long-term .So that increasing the inflation and liquidity in the amount of 10% The total price of the stock market increase 37/3 and 17/8, respectively during the short period and 33.3 and 23.7 percent, respectively during the long period. The results indicate the effect of exchange rate on the stock market is negative and significant during the short and long term. So that, this variable increased by 10 percent the stock market reduce over than 17/7 and 12/4 percent, respectively in the short and long-term.