One of the features of developed countries is the existence of effective financial markets, which not only play an important role in the economy, but also facilitate economic growth and a country's development. Stock exchangedevelopment is affected by many macroeconomic variables. In this survey, we mainly attempt to examine the effect of macroeconomic variables on the development of the Tehran Stock Exchange. To do so, national income, investment rate, financial intermediary development and

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... roeconomic instability are considered as macroeconomic variables, and depth and breadth are considered as indices of the stock exchange development. Necessary data were collected seasonally during 1998-2007. For statistical analysis, we first examined stationary of the variables by augmenting the Dickey-Fuller Unit Root Test. Then, the Johansen co-integration Test was used to estimate co-integration vectors. Finally, we used the Vector Error Correction Model to test the research model. Findings suggest that national income and investment rates have a positive, significant effect on the depth and breadth of the stock exchange. Also, financial intermediary development and macroeconomic instability have a negative, significant effect on the depth and breadth of the stock exchange.