STUDYING THE ROLE OF BANKING SYSTEM ON PRIVATE SECTOR INVESTMENT IN IRAN

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HAFEZI HAMED

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Journal: TREND (TREND OF ECONOMIC RESEARCH) Year:2015 | Volume:21 | Issue:68 Page(s): 87-119

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Title

STUDYING THE ROLE OF BANKING SYSTEM ON PRIVATE SECTOR INVESTMENT IN IRAN

Author(s)

HAFEZI HAMED | Issue Writer Certificate

Keywords

WEIGHTED RATE OF PROFITQ2

FORMATION OF FIXED GROSS INVESTMENTQ2

AUTOREGRESSIVE DISTRIBUTED LAG ESTIMATOR MODELQ2

REAL EFFECTIVE EXCHANGE RATEQ2

Abstract

One of the most important factor which is affecting on economic growth is considered to be the development of financial market and augmentation of aggregate investment. In developing countries, due to flaws and shortage of capital market, lack of expansion of stock market and economic institutions de facto, there is no any possibility to raise the funds from these sources and subsequently, the high cost of procuring capital from the informal market, imposition of western sanctions on financial sector of Iran and economic pressures emanating from these constraints and non availability of external financing, all and all help per se, to resort significantly to organized money market and banking system for raising the required resources. Thus, banks irrespective of their degrees of financial deepening, can play the crucial role in developing countries. Investors are usually inclined to maximize their profits through reduction of production costs. However, the major share of these costs are borne from the explicit outlays of banking facilities which are eventually extended to them and sine qua non, payment of interest rates for procuring the required loans in toto.In this paper, an attempt is made to investigate the impact of total volume of banks facilities extended to private sector on investment of private sector. For this purpose, we applied the Autoregressive Distributed Lag methodology for estimating the model. The results prima facie, indicate that in the short-run, the public investment bears a negative relation with private investment, while the volume of facilities extended by banks has a direct and positive relation with investment of private sector. Nonetheless, the REAL EFFECTIVE EXCHANGE RATE carries a direct and positive impact on private investment but the WEIGHTED RATE OF PROFIT of banking system has negative and indirect relation with investment of private sector. Similarly, in the long run, we have found that the public investment has negative relation with private investment and volume of bank facilities bears direct and positive relation with private investment. The WEIGHTED RATE OF PROFIT of banks also contains a negative impact on private investment, where the REAL EFFECTIVE EXCHANGE RATE has a negative and inverse relation with private investment quid pro qua.

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APA: Copy

HAFEZI, HAMED. (2015). STUDYING THE ROLE OF BANKING SYSTEM ON PRIVATE SECTOR INVESTMENT IN IRAN. TREND (TREND OF ECONOMIC RESEARCH), 21(68), 87-119. SID. https://sid.ir/paper/202238/en

Vancouver: Copy

HAFEZI HAMED. STUDYING THE ROLE OF BANKING SYSTEM ON PRIVATE SECTOR INVESTMENT IN IRAN. TREND (TREND OF ECONOMIC RESEARCH)[Internet]. 2015;21(68):87-119. Available from: https://sid.ir/paper/202238/en

IEEE: Copy

HAMED HAFEZI, “STUDYING THE ROLE OF BANKING SYSTEM ON PRIVATE SECTOR INVESTMENT IN IRAN,” TREND (TREND OF ECONOMIC RESEARCH), vol. 21, no. 68, pp. 87–119, 2015, [Online]. Available: https://sid.ir/paper/202238/en

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