The Effect the Volatility Exchange Rate on Bank Deposits Iran

Banking industry is one of the most important sections all over the world. It plays a decisive role in development and economic growth of all countries. A glimse into this industry reveals that bank deposits are the most significant resources of financing for banks. In other words, since a considerable amount of banks capital is provided through deposits, banks will fail to exist without them. Moreover, exchange rate is one of the key factors which has a noticeable impact on different economic sections among which is bank industry. It is one of the undeniable variables which is given particular attention in economic policymaking. Accordingly, the purpose of this paper is to investigate the effect of exchange rate fluctuations on bank deposits volume in Iran.  

There is two steps to this paper. Firstly, exchange rate fluctuations are calculated using the approch of ARCH/GARCH conditional variance. Then, using ARDL method, long-run and short-run corrolations during 1986-2017is investigated.  

The results of the paper indicate that: 1) there is a negative relationship between exchange rate fluctuations and bank deposits volume in Iran. In other words, if exchange rates swings increase, people will deposit less money in banks. 2) economic growth of Iran has a significantly positive relationship with the amount of exchange rate.  

There is a negative relationship between exchange rate fluctuations and the volume of bank deposits, ie with the decrease of exchange rate fluctuations, the amount of bank deposits increases, so it is necessary to adopt appropriate exchange rate policies to reduce exchange rate fluctuations and its negative effects on bank deposits.