A Model of Financial Shocks at Bank and Interbank of Iran (DSGE)

Abbas Shakeri and Azam Ahmadian ()
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Abbas Shakeri : Faculty of Economics, Allame TabaTabaee University
Azam Ahmadian : Monetary and Banking Research Institute (MBRI), Central Bank of the Islamic Republic of Iran (CBI)

Journal of Money and Economy, 2013, vol. 8, issue 4, 19-58

Abstract: This paper proposes a fully micro-founded framework that incorporates optimizing banks into a DSGE model, and evaluates the role of banks and financial shocks in the Iranian business cycles. We consider banks that offer different banking services and interact in an interbank market. Loans are produced using interbank borrowing and deposits. Banks have monopoly power, but cannot set nominal deposit and prime lending rates. The model also includes financial and unconventional monetary policy shocks. The main findings are: (1) Capturing the key features of the economy of Iran; (2) bank behavior substantially affects credit supply conditions and the transmission of different shocks; (3) financial shocks have significant effects on the Iranian business cycle fluctuations.

Keywords: Banks; Interbank market; Financial shocks; Monetary policy (search for similar items in EconPapers)
JEL-codes: E12 E32 E37 E44 G21 G33 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:mbr:jmonec:v:8:y:2013:i:4:p:19-58

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