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Aspects of the Financial Cycle in Iran's Economy

Author

Listed:
  • Keshtgar, Nafise

    (Ph.D. Candidate in Economics, Sistan & Balochestan University)

  • Pahlavani, Mosayeb

    (Associate Professor of Economics, Sistan & Balochestan University)

  • Mirjalili, Seyd Hossein

    (Associate Professor of Economics, Institute for Humanities and Cultural Studies)

Abstract

This article examined some aspects of financial cycle in Iran's economy by using seasonal observations during 1990 to 2016. Moreover, the structural time series model with unobserved components and the Kalman filter are utilized, and the parameters are estimated using the maximum likelihood method. The results indicate that, first, the ratio of loan to deposit has been volatile and the gap between loan and deposit as a funding gap is one of the causes of the financial crisis. Moreover, by using Markov's switching model, we identified the primacy of credit acceleration to the banking crisis.Second, the financial cycle emanate from credit expansion and in turn the increase in the ratio of credit to GDP. Third, Logit regression indicates a positive relationship between the probability of a banking crisis and the ratio of credit to GDP.

Suggested Citation

  • Keshtgar, Nafise & Pahlavani, Mosayeb & Mirjalili, Seyd Hossein, 2019. "Aspects of the Financial Cycle in Iran's Economy," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 6(2), pages 135-160, August.
    • Handle: RePEc:ris:qjatoe:0151
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    More about this item

    Keywords

    Banking system; Credit to GDP ratio; Financial cycle; Logit model;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G01 - Financial Economics - - General - - - Financial Crises
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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