Investigating the Effect of Bank Facilities on Business Cycle in Services and Housing Sectors in Iran's Economy

Banks are the main part of the money market in Iran's economy. Therefore, determining the effect of bank facilities on production during recession and boom periods can be effective in applying better monetary policies. In this study we estimate the business cycles in housing and service sectors by using the Hodrick-Prescott filter, the study also examines the effects of bank facilities on the business cycles of these sectors in Iran during the period 1978 to 2018 using the VECM method. The adjustment coefficient related to the estimated equilibrium relationship in the service and housing sectors shows that the speed of adjustment in housing is six times that of services, also the results show that bank facilities in the long run reduce the fluctuations of business cycles in the housing sector, while in the service sector, the fluctuations of business cycles generally have a downward trend.