Effects of Macroeconomic Variables and market power on Banking Sector's Deposits (Bayesian Model Averaging Approach in Panel Data)

Subject Areas : Financial engineering

mahboubeh shakiba ¹ , alireza Daghighiasli ² , marjan damankeshideh ³ , majid fashari ⁴ , Ali Esmaeelzadeh Maghari ⁵

1 - PHD Student of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran.
2 - Department of Economic, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran.
3 - Department of Economic, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran.
4 - Department of General Economic Affairs, Faculty of Economics, kharazmi university, tehran, iran.
5 - Department of Accounting, Faculty of management and Accounting, islamshahr Branch, Islamic Azad University, Tehran, Iran.

Received: 2019-05-16 Accepted : 2019-07-08 Published : 2019-12-22

Keywords: Banking industry, Market power, Macroeconomic Variables, E17, Banking Deposits, Bayesian Model Averaging Approach. JEL Classification: C23,

Abstract :

Market power specifies how firms in a market influence prices, and reveals the level of competition in the market. This paper investigated the impact of market power and macroeconomic variables effect on banking deposits in Iranian deposit money market using dynamic Bresnahan-Lau’s and Bayesian model averaging approach for the 18 bank in the Iran industrial banking sector. Annual data for the period of 2006- 2016 has been collected from annual financial statements of Iranian banks, Statistical Centre of Iran, Monetary and Banking Research Institute of Iran and central bank of Iran. By applying BMA approach the main macroeconomic variables have been determined from 8 variables. The results of model estimation indicated that market power for its 18 Iranian banks were 0.58 and the macroeconomic variables of liquidity money has negative and other explanatory variables such as fixed assets, growth of GDP, first order lag of deposits, deposits rate and cross effect of GGDP with deposits rate have positive posterior average on banking sector's deposits during the period of study.

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