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Empirical Investigation of Risk Tacking Channel of Monetary Policy in Iran

Author

Listed:
  • Farhad Rahbar

    (Tehran University, Faculty of Economics, Tehran, Iran)

  • Mostafa Sargolzaei

    (Tehran University, Faculty of Economics, Tehran, Iran)

Abstract

This study deals with investigation of existence of monetary policy risk channel in the economy of Iran. For the same purpose, the seasonal data of macroeconomic variables are used in such a manner that changes in interest rate as an indicator of monetary policy and bank leverage ratio as an indicator of risk are considered. Using VAR approach and Impulse response functions, the experimental test of channel of monetary policy risk in the economy of Iran was examined. The results showed that an expansionary monetary policy which occurs by decrease in interest rates causes that risk of bank system to be increased. In addition, it should be stated that inflation had positive impacts and economic growth had negative impacts on the risk of bank system.

Suggested Citation

  • Farhad Rahbar & Mostafa Sargolzaei, 2014. "Empirical Investigation of Risk Tacking Channel of Monetary Policy in Iran," Hyperion Economic Journal, Faculty of Economic Sciences, Hyperion University of Bucharest, Romania, vol. 2(3), pages 20-28, September.
    • Handle: RePEc:hyp:journl:v:2:y:2014:i:3:p:20-28
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    More about this item

    Keywords

    Monetary Policy; Risk Tacking Channel; VAR;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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