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Macro-prudential policies and financial cycle in Iran

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  • Mirjalili, Seyed Hossein
  • Nafiseh Keshtgar
  • Mosayeb Pahlavani

Abstract

Financial markets are channels for attracting surplus financial resources and allocating them to investment. Macro-prudential policy needs to consider the financial cycle in order to assess the state of the financial sector, predict its developments and justify the need for specific policy tools. we examined the effect of macroprudential policies on the financial cycle of Iran's economy Over the period 2008-2018 using Unobserved Components Structural Time Series Model. We explored the effect of the macroprudential policy index and other variables on the financial cycle. The findings of this study, using the Generalized method of moments (GMM) for the time series data, suggested that the macro-prudential policy index has a negative and significant effect on the financial cycle in the Iranian economy. Also, the probability(likelihood) of a banking crisis, the interbank market loan rate, and the economic growth index have a positive and significant effect on the financial cycle.

Suggested Citation

  • Mirjalili, Seyed Hossein & Nafiseh Keshtgar & Mosayeb Pahlavani, 2021. "Macro-prudential policies and financial cycle in Iran," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 13(1), pages 95-114.
    • Handle: RePEc:zbw:espost:248644
    DOI: 10.22111/ijbds.2021.6582
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    1. Keshtgar, Nafiseh & Pahlavani, Mosayeb & Mirjalili, Seyed Hossein, 2020. "The Impact of Macroprudential Policies on the Vulnerability of the Banking System: Dynamic Panel Model," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 15(4), pages 357-379.

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