Assessing Financial Stability in the Iranian Economy under Monetary Policy and Macroprudential Policy

Document Type : Original Article

Authors

1 Phd candidate of economy,Islamic Azad University of Isfahan, Khorasgan Branch, Isfahan, Iran

2 Associate Professor, Department of Economics, Islamic Azad University of Isfahan, Branch / Khorasgan Branch, Isfahan, Iran

3 Assistant Professor, Department of Economics, Islamic Azad University, Islamic Azad University of Isfahan, Khorasgan Branch, Isfahan, Iran

Abstract

The purpose of this article is to review and evaluate the financial stability in the Iranian economy for the period 2009-09-1991 under Monetary Policy and Macroprudential Policy. For this purpose, an attempt was made to address this issue at both micro and macro levels. At the micro level, using the Generalized method of moments (GMM), the effects of monetary and macroeconomic policies in four different modes on the risk-taking of the country's banking network were evaluated. At the macro level, a structural vector autoregression (SVAR) model was used to investigate the effects of these two policies on housing prices and stock prices. The results confirm that, firstly; To regulate banks' risk-taking, monetary and macro-prudential policies contrary to the periodicity of business cycles should be used. Thus, the relationship between the rate of legal reserves as an indirect monetary instrument at the disposal of the country's monetary authority with the level of risk-taking of banks was positively and statistically significant. In this sense, with the increase of the legal reserve rate (apply a tight monetary policy), the interest rate will increase and this will increase the riskiness of banks. Also, increasing the deposit rate as a macro-prudential policy tool has been associated with reducing the riskiness of banks. Secondly; tight monetary policy has the potential to deter rising housing and stock prices, although the extent of this impact is not significant compared to other factors affecting the prices of both housing and equity assets.

Keywords

References

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