Asset markets and real efficiency of facilities granted by banking network: an application of Simultaneous Equations Approach

Abstract

This study investigates the impact of exchange rate, stock index, and oil incomes on the efficiency of facilities or loans granted by the banking network during 2005:1-2022:2 in quarter intervals using the three-stage least squares (3SLS) model. The results show that the efficiency of the loans granted by the banking network has been descending in stimulating the real sector of the economy, and this decline has been more during sanctions. Moreover, the results indicate that an increase in the exchange rate negatively and significantly impacts the efficiency of granted loans. In contrast, the increase in the oil income has a positive and significant effect on this variable. On the other hand, improvement in the efficiency of granted loans and lagged stock index leads to a reduction in exchange rate. Also, improved efficiency of lending and exchange rate has a positive and significant impact with a lag on the stock index in the country. Therefore, the currency reserve fund plays a significant role in the short-term in the country, which can be a factor for exchange rate control preventing its effects on the loans' efficiency and other parallel markets. On the other hand, Iran's economic dependence on oil incomes must be decreased so as not to face problems when any change occurs in the economy and asset markets because these changes may affect the efficiency of loans granted by the banking network.