An Analysis of Macroeconomic Effects of Securitisation in the Islamic Republic of Iran's Banking System

Today, a large part of the financial needs of investors in financial markets is being funded using modern financial instruments. With reduced risk for financial institutions, securities are new instruments used for providing financial resources. Recent studies on securitization have suggested the use of this instrument and the transformation of granted facilities to securities in order to finance the banks of the country, regardless of its macroeconomic effects. In order to prevent the negative macroeconomic effects of unawareness of the unnecessary development of this process, this paper studies the effects of macroeconomic securitization in the Islamic Republic of Iran’s Banking System. The research method is theoretical analysis within the framework of a random dynamic equilibrium model. The theoretical model used is the economic growth model that includes financial intermediaries (banks), adds monetary and banking sectors and is based on the economic growth model of Frank Ramsey (1928). To transform this model into a suitable model for research, shadow banking system and securities are added to the model; then, the model is simulated through calibration method and using real structural parameters of Iran's economy. Finally, the changes and macroeconomic fluctuations resulting from the use of securities are explained and analyzed. The research findings show that the use of securities to finance domestic banks will have some negative macroeconomic effects, including a decline in economic growth and employment, and an increase in inflation.