Mechanism of the impact of exchange rate jumps and the global financial crisis on the financial stability of the public banking system using the Griton and Roper model

Document Type : Research Paper

Authors

1 PhD Student in Economics, Department of Economics, Aligudarz Branch, Islamic Azad University

2 Assistant Professor, Department of Economics, Faculty of Administrative Sciences and Economics, University of Isfahan, Iran

3 asistant professor, department of economics, ayatollah borujerdi university

4 Assistant Professor, Department of Economics, Faculty of Humanities, Ayatollah Boroujerdi University, Iran

Abstract

The present study is the mechanism of the effect of exchange rate fluctuations and the global financial crisis on the financial stability of the state banking system of the Iranian economy using Griton and Roper model and using Markov switching regime econometric model, from 1984 to 2019 and affected by exchange rate fluctuations and Examines the global financial crisis. According to the results, the rate of economic exposure to the recession period for the period under study inthe present study is 18 periods versus 16 periods of prosperity. Also, based on the probability transfer functions related to the estimation model, if the Iranian economy is in a recession, it is likely to remain in the same position 0.85 and 0.13, it is likely that the Iranian economy will return to the boom situation under other factors. The country's economy will be in a state of prosperity, despite oil price fluctuations and financial crises, it is likely to remain at 0.13 and 0.86 is likely to be in a recession under other factors. Because expectations play a very important role in investment decisions, any political, economic instability, shocks, fluctuations, and currency jumps can have a negative effect on banking stability, increasing long-term investment risk, and distorting price information. And even causes capital flight. In such circumstances, the composition of the investment changes in favor of speculative activities that is instantaneous and productive to the detriment of the investment

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References

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