An Investigation on the Balance-Sheet Channel in Monetary Transmission Mechanism with Emphasis on the Role of Firms (Case Study of Iran)

Document Type : Research Paper


1 PhD. Candidate in Economics, University of Tabriz

2 Professor of Economics, University of Tabriz


The balance-sheet channel was introduced after the big financial crises of 2008 and following the inability of the previous channels of monetary transmission mechanism to respond to the economic events. This channel similar to the bank lending channel can be categorized as one of the credit channels and based on the assumption of the inefficient and imperfect markets according to the asymmetric information. This channel sheds light on the important role of the firms in the transmission of monetary policy to the real economic variables. The financial statements of fifty nonfinancial firms from 2007 up to 2014 are studied by using the GMM method. In brief, the results indicate the negative and significant effect of the net worth of the firms and the interaction variable of monetary policy and the interest coverage ratio of the firms on the received loans. Therefore the effect of the monetary policy is boosted through the interest coverage ratio. Other findings relative to the macro and external organization factors, indicate the positive impact of the gross domestic product and price index on the received loans.


Main Subjects

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