Investigating the Relationship between the Facility Interest Rate and the Bank Deposit Interest Rate in Iran

Subject Areas : Financial and Economic Modelling

Zahra  Haerinasab ¹ (Department of Accounting, Razi University, Kermanshah, Iran)
Kiomars  Sohaili ² (Department of Accounting, Razi University, Kermanshah, Iran)
Shahram  Fattahi ³ (Department of Accounting, Razi University, Kermanshah, Iran)

Received: 2018-11-16 Accepted : 2019-01-14 Published : 2018-12-01

Keywords: Three-stage Least Squar, Deposit Interest rate, Iran, Facility Interest Rate,

Abstract :

The facility interest rate is one of the most important macroeconomic variables. The bank facility interest rate is associated with other macro-economic variables, one of which is the bank deposit interest rate. Using the time series data of the 1973-2017 period and the simultaneous equation system, the researchers estimated four equations using the three-stage least squares method.The result of estimation of the first equation indicates that there is a significant positive relationship between the bank deposit interest rate and the facility interest rate in the Iranian economy during this 45-year period, in that a decrease in the facility interest rate follows an increase in the inflation rate.The result of estimation of the second equation, in which the deposit interest rate is the dependent variable, shows that there is a significant positive relationship between the facility interest rate and the deposit interest rate.. The result of estimation of the third equation, where the inflation rate is the dependent variable, indicates that there is a significant positive relationship between the liquidity level and the inflation rate,The result of estimation of the last equation where the credit risk of banks is the dependent variable shows that there is a significant positive relationship between the facility interest rate and the credit risk.

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