Analysis of the effects of financial development and monetary policy on economic growth through the bank lending channel

Analysis of the effects of financial development and monetary policy on economic growth through the bank lending channel

Subject Areas : Financial Knowledge of Securities Analysis

Bahram Hatami ¹ , hosein sharifi renani ² , saeed daeekarimzade ³

1 - PhD student in the field of economic sciences, Isfahan Branch (Khorasgan), Islamic Azad University, Isfahan, Iran
2 - Associate Professor, Department of Economics, Isfahan Branch (Khorasgan), Islamic Azad University, Isfahan, Iran(Corresponding Author).
3 - Associate Professor, Department of Economics, Isfahan Branch (Khorasgan), Islamic Azad University, Isfahan, Iran

Received: 2024-10-26 Accepted : 2024-12-14 Published : 2025-03-18

Keywords: Credit Market, Bank System, Monetary Policy, Economic Growth.,

Abstract :

Monetary policy transmission channels that are related to the banking sector and the credit perspective are considered as an important and key factor in influencing macroeconomic components. Regarding the capital market in Iran, financing of various economic sectors is mainly done by the banking system. In most cases, banks' lending behavior is influenced by monetary policies, financial development and economic fluctuations and is adjusted in response to these signs. The purpose of this article is to investigate the role of credit market development and monetary policy on economic growth through the bank lending channel in Iran during the period from the first quarter of 1998 to the first quarter of 2020. For this purpose, the effect of monetary policies and financial development in credit markets on the amount of bank lending and then the effect of bank lending on economic growth were estimated using the generalized moments method (GMM). After that, the mediating role of the bank lending channel in transferring the effect of monetary policies and financial development on economic growth was tested by calculating the Sobel statistic. The results indicated that monetary policy had a negative effect on bank lending through the increase of interest rates. 

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