Aspects of the Financial Cycle in Iran's Economy

Document Type : Research Paper

Authors

1 Ph.D. Candidate in Economics, Sistan & Balochestan University

2 Associate Professor of Economics, Sistan & Balochestan University

3 Associate Professor of Economics, Institute for Humanities and Cultural Studies

Abstract

This article examined some aspects of financial cycle in Iran's economy by using seasonal observations during 1990 to 2016. Moreover, the structural time series model with unobserved components and the Kalman filter are utilized, and the parameters are estimated using the maximum likelihood method. The results indicate that, first, the ratio of loan to deposit has been volatile and the gap between loan and deposit as a funding gap is one of the causes of the financial crisis. Moreover, by using Markov's switching model, we identified the primacy of credit acceleration to the banking crisis.Second, the financial cycle emanate from credit expansion and in turn the increase in the ratio of credit to GDP. Third, Logit regression indicates a positive relationship between the probability of a banking crisis and the ratio of credit to GDP.

Keywords

Main Subjects

References

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