The Relation between the Rate of Inflation and Deposits Profit Rates in Iran Banking System

In recent years following the ratification of the rationalization of banks interest rate law (reducing this rate) and absence of efficiency and development in the alternative banking system، understanding the relationship of two macroeconomic factors of inflation rate and interest rate of deposits is a matter of the great importance. Using the Error Correction Model and correction of mistakes، that help us to distinguish between long term and short term fluctuations، the results of this study show that there is a significant positive relationship between interest and inflation rates in long term. In the other word، inflation rate is the reason of correlated fluctuation of interest rate of deposits. Also by case studying of Sepah bank branches in Tehran، a reverse relationship between inflation rate and various kinds of deposits and a direct relationship with national income growth has been established.