The Test of Money Neutrality In Stock Market of Iran

In recent years, the role of stock market in the economy of Iran is growing. Therefore, it is important to recognize the factors affecting to this market. Changes in the money supply can be one of this factors, so this study investigates long run Neutrality of money in the stock market of Iran. In this regard, quarterly data of monetary aggregates M1, M2 and the real stock indexes that is total index, industrial index and financial index are employed in this study over the period 1380 to 1394. Then, Hegy test was used for unit root test of seasonal data. The Fisher-Seater (FS) methodology is used to do the Neutrality test in this research. The empirical results indicated that there was long-run neutrality of money (defined as M1) with respect to all real stock indexes. Similar results were also obtained for money defined as M2. In general, the results support that money is neutral in the stock market of Iran.