Volume 18, Issue 2 (6-2023)                   J. Mon. Ec. 2023, 18(2): 205-238 | Back to browse issues page

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Tavakolian H, Bahrami J, Mohammadi T, Asadi Z. The Role of Bank Capital in the Propagation of Shocks in Iran: A Dynamic Stochastic General Equilibrium Approach. J. Mon. Ec. 2023; 18 (2) : 4
URL: http://jme.mbri.ac.ir/article-1-637-en.html
The Role of Bank Capital in the Propagation of Shocks in Iran: A Dynamic Stochastic General Equilibrium Approach
Hossein Tavakolian *1 , Javid Bahrami1 , Teymur Mohammadi1 , Zivar Asadi2
1- Faculty of Economics, Allameh Tabataba'i University
2- PhD Student, Allameh Tabtaba'i Universityy
Abstract:   (390 Views)
Considering the intermediary role of banks in the economy and their critical function in the propagation of economic shocks to the real sector, this study aims to investigate the role of bank capital in analyzing the relationship between banks' balance sheet characteristics and economic fluctuations using a Dynamic Stochastic General Equilibrium (DSGE) model. The results demonstrate that, in the model with a bank capital channel, positive shocks lead to more robust economic growth. This is attributed to the banks' ability to invest, enhancing the positive effects of shocks. Taking bank capital into account, variables such as consumption, and inflation exhibit better performance, with reduced fluctuations or quicker adjustments, leading to economic stability. Conversely, in an economic scenario without a bank capital channel, positive shocks have a lesser impact on economic variables. Consequently, the results can effectively inform decision-making regarding the necessity of adhering to bank capital adequacy ratios.
 
Article number: 4
Keywords: Dynamic Stochastic General Equilibrium model, Bank Capital, Oil, Capital Adequacy Shock
Full-Text [PDF 877 kb]   (211 Downloads)    
Type of Study: Original Research - Empirical | Subject: Monetary Economics
Received: 8 Aug 2023 | Accepted: 17 Jan 2024 | Published: 30 Jul 2024
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