Measuring Money Market Pressure Index in Iran

While financial market in Iran’s economy is based on banking system، Money market is very important one in Iran. The financial crises of the past decade، and the IMF’s initiative to build an early warning system against such crises، have stimulated a wave of research into the empirical determinants of banking crises. A common methodological challenge facing empirical research in this area is the identification of crises events. There are two common way to identify banking crisis; event method and Money Market Pressure Index. Therefore، the main goal of this paper is to measure Money Market Pressure Index in Iran. After reviewing existing literatures، both from the theoretical and empirical aspects، using monthly data during 1971- 2008 we introduce and measure the banking crisis index for Iran’s economy. The results indicate that the Iranian banking system has experienced crisis frequently، however، due to the state-owned banking system in Iran، those crisis have remained unobserved.