The Effect of Monetary Policies on Performance of Banks: A Dynamic Stochastic General Equilibrium (DSGE) Approach

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rafiee sorayya; EMAMI KARIM; GHAFFARI FARHAD

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Journal: ECONOMIC RESEARCH REVIEW Year:2019 | Volume:19 | Issue:72 Page(s): 1-36

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Title

The Effect of Monetary Policies on Performance of Banks: A Dynamic Stochastic General Equilibrium (DSGE) Approach

Author(s)

rafiee sorayya | EMAMI KARIM | GHAFFARI FARHAD | Issue Writer Certificate

Keywords

Monetary PoliciesQ2

Islamic BankingQ2

Monetary ShockQ1

DSGEQ1

Abstract

Banking system, as one of the most important parts of macroeconomy, plays a vital role in general economic equilibrium and transition of economic shocks in the society. Because of that, it is of sensitive role in national economy. In addition to implementing dictated Monetary Policies of central banks, they as any economic business, pursue the goal of increasing their profitability. In this study, we use Dynamic Stochastic General Equilibrium (DSGE) and take into account five economic sectors, namely households, entrepreneurs, mediator banks, distributors and government, to study the reaction of banks to emergence of Monetary Shocks. For this purpose, the authors seek to make use of long-term macroeconomic parameters. The results of our model show that, upon emergence of a positive shock on interest rate, due to the decrease of request for loan and the amount of lent money, the rate of loaning and as a result, the profit of banks is reduced, and in the case of a positive oil shock, the amount of market liquidity increases so the rate of loaning decreases and the scale of investment increases and finally, the households’ willingness to save is reduced. Therefore, the outcome of decrease of lending rate and decrease of deposits leads to a reduction in banks’ profitability.

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APA: Copy

rafiee, sorayya, EMAMI, KARIM, & GHAFFARI, FARHAD. (2019). The Effect of Monetary Policies on Performance of Banks: A Dynamic Stochastic General Equilibrium (DSGE) Approach. ECONOMIC RESEARCH REVIEW, 19(72 ), 1-36. SID. https://sid.ir/paper/369762/en

Vancouver: Copy

rafiee sorayya, EMAMI KARIM, GHAFFARI FARHAD. The Effect of Monetary Policies on Performance of Banks: A Dynamic Stochastic General Equilibrium (DSGE) Approach. ECONOMIC RESEARCH REVIEW[Internet]. 2019;19(72 ):1-36. Available from: https://sid.ir/paper/369762/en

IEEE: Copy

sorayya rafiee, KARIM EMAMI, and FARHAD GHAFFARI, “The Effect of Monetary Policies on Performance of Banks: A Dynamic Stochastic General Equilibrium (DSGE) Approach,” ECONOMIC RESEARCH REVIEW, vol. 19, no. 72 , pp. 1–36, 2019, [Online]. Available: https://sid.ir/paper/369762/en

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