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Simultaneous Effects of Bank Concentration and Monetary Policy on Bank Lending Channel in Iranian Banking System (in Persian)

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  • Shahchera, Mahshid

    (Iran)

  • Keshishian, Lian

    (Iran)

Abstract

The main goal of this paper is to study the impact of concentration and the interaction term of monetary policy with concentration index on bank lending in Iranian banking system. This paper determined the effect of the reserve requirement rate as monetary policy indicator and the effect of the interaction term of monetary policy with concentration index. This research estimates the model by Dynamic Panel Data method and Generalized Moment Method (GMM). In order to, both macroeconomic and bank-level balance sheet data for eighteen banks of Iranian banking industry from 2001 to 2012 are used. The estimation results show that the coefficients of concentration variable which is estimated for three different indexes including Herfindahl - Hirshman Index, concentration ratio (CR4) and the Entropy index, are statistically significant and negative, suggesting that increased concentration reduces lending of the banks and weakens the lending channel as a monetary transmission mechanism. The interaction term of monetary policy with concentration index which is estimated by three different concentration indexes, has significant and negative impact on bank lending channel, suggesting that any increase in this variable reduces lending of the banks.

Suggested Citation

  • Shahchera, Mahshid & Keshishian, Lian, 2014. "Simultaneous Effects of Bank Concentration and Monetary Policy on Bank Lending Channel in Iranian Banking System (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 7(19), pages 27-50, May.
    • Handle: RePEc:mbr:jmbres:v:7:y:2014:i:19:p:27-50
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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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