An application of the ARDL Bounding Test in the relationship between central bank independence and the stock market in Iran

The decisions of the central bank, as the most important monetary institution of any country, have an impact on the companies whose shares are bought and sold in the stock exchange, and this market is dependent on the policies of the central bank. Considering the importance of this issue, in the present study, the effect of central bank independence on the stock returns of active industries in the Tehran Stock Exchange during the period of 1370 to 1399 will be investigated by using the ARDL Bounding Test. Results of the model indicate that increasing the degree of central bank independence increases the stock returns of active industries in the Tehran Stock Exchange. Also, the findings show that the impact of GDP growth, interest rate, oil price and turnover ratio on stock returns is positive and on the other hand, inflation rate and real exchange rate have a negative effect on stock returns.