The Impacts of Inflation Volatility on the Bank Lending Scheme

Banks are de facto deemed to be the most important financial intermediaries that may exert the fundamental and per se the crucial role in the economy of each country in toto. In this context, banks as the economic entity may pray to various aggregate macroeconomic shocks and also the endogenous and intrinsic specific particularities of each bank, Sui generis. The inflation volatility is de jure contemplated as a macroeconomic shock which may affect on the lending capacity of banks Viz–a-Viz permutation in the economic environment and accretion of uncertainty, Sine qua non. In this paper, an attempt is made to investigate the impacts of inflationary vicissitudes on the allocation of loans extended by the designated Iranian banks, Ipso facto. However, the pertinent research hypothesis specified that the inflation volatility could inflict the negative and significant impacts on the lending scheme of designated banks Pro rata. Besides, we deployed the panel data of 9 designated listed banks for the study period of 2007-2016. The results of Multivariate Regression prima facie, indicate that the volatility of inflation bears the negative and significant impacts on the allocation of resources for the banks under the study, Quid pro qua. We have also observed that the other independent variables i.e. the bank size and the Non Performing Loans (NPL) have negative effects on the bank lending scheme, A fortiori