Aspects of the Financial Cycle in Iran's Economy

Nafise Keshtgar (), Mosayeb Pahlavani () and Seyed Hossein Mirjalili
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Nafise Keshtgar: Ph.D. Candidate in Economics, Sistan & Balochestan University
Mosayeb Pahlavani: Associate Professor of Economics, Sistan & Balochestan University

Quarterly Journal of Applied Theories of Economics, 2019, vol. 6, issue 2, 135-160

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: Banking system; Credit to GDP ratio; Financial cycle; Logit model (search for similar items in EconPapers)
JEL-codes: C22 E32 G01 N10 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:ris:qjatoe:0151

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