Uncertainty of inflation rate and fluctuations of different parts of the stock market in Iran

This study examines the relationship between the dynamic fluctuations of inflation rate uncertainty and the fluctuations of different parts of the stock market both in the time domain and in the frequency domain (short-term, medium-term, and long-term) in Iran. Using the time-frequency connectedness approach, the results showed that there is a high correlation between the uncertainty of macroeconomic variables and the fluctuations of different parts of the stock market in the short and medium term, and this correlation decreases in the long term. In the time domain, the inflation rate overflow fluctuations are positive and this shows that the uncertainty about the inflation rate transmits the shock to different parts of the stock market. In the frequency domain, in more sub-periods, the inflation rate uncertainty is the risk taker and its value is negative. Also, the average correlation of the net fluctuation of inflation uncertainty in the long term is higher than in the medium and short term, which shows that the uncertainty of the inflation rate in the long term transmits more risk to different sectors of the stock market, and in the short term, the sectors cement, basic metals, chemicals, investment and food, in the medium term, the cement and computer sectors, and in the long term, the petroleum and computer sectors are more vulnerable to the uncertainty of the inflation rate.