The effect of Monetary Policy on the GDP by the Loan Channel of Bank System in Iran

The aim of this research is to consider the effect of the monetary policy on the production and inflation through the bank credit channel (Loan Channels) during 1989-2008 in Iran. So, the effect of monetary policy will be considered through the bank loan channel by Vector Error Correction model (VEC). In general, the results show that the more the amount of money by developing bank debts to the central bank, only the production level will be expanded in short-term and even it has negative effect in long-term. But, the general level of prices will be increased in short and long-term. So, the use of this policy tools affecting the level of the production is not suitable. But, it can contribute as an anti-inflationary policy.