An Analyzing of The Power of Providing Credit by The Iranian Banking System In the Event of Financial Frictions in The Framework of Macro Structural Econometric Model

Given the bank centered nature of the financing market in the Iranian economy, the performance of the banking system is very influential in the level of production and cost of goods, and the fluctuation in access to bank credits and increase in the cost of access to it provide a good basis for disruptions economic. One of the problems facing the banking system, especially in recent year, is financial friction, which is evident in indicators such as the ratio of non performing loans, the ratio of fixed assets to total assets and government debt accumulation. In this paper, by the aid build of a structural macroeconometric model in the period of 1967-2015, Has been investigated the effect of the financial frictions on the power of providing credit by the banking system. At the same time, the comparison of the effect of reducing financial frictions with the effect of the expansionary monetary policy on the power of providing credit by the banking system and finally, the comparison of the effectiveness of expansionary monetary policy on the reduction of financial friction with the effectiveness of expansionary monetary policy has been investigated. The dynamic simulation results of the model show that the power of providing credit by the banking system increases by an average of 16 percent, due to the reduction of financial frictions annually by one standard deviation. Also, the effect of reducing financial frictions, in comparison with the effect of expansionary monetary policy on the Power of Providing Credit by The Banking Systemis on average 10 percent higher. In addition, the effectiveness of the expansionary monetary policy on the power of providing credit by the banking System in the event of a reduction in financial frictions as much as one standard deviation is on average 17 percent higher than when fiscal frictions are not reduced.