Advertisement

Credit Crunch Testing in Iranian Banking System

  • Mahshid ShahcheraEmail author
  • Fatemeh Noorbakhsh
  • Homa Monfared
Conference paper
Part of the Springer Proceedings in Business and Economics book series (SPBE)

Abstract

There are many economic factors related to credit crunch, which includes structure of banking system, private sector, investment and government. Among these factors structure of banking system in Iranian banking system known as the most important one. They consider it as a continuous decline in credit demand. However, number of economists minimized the important factors, which have reduced the ability of credit supply by banks. The credit crunch indicates reduction in credit demand and the weaknesses of balance sheets in banking system. Data analysis is also important to study the credit crunch, and this phenomenon would be develop at the state level, however, economic shock at the national level could decline bank capital. We aim to test the existence of credit crunch in Iranian banking system. We also examine the effective factors, which have significant impact on credit crunch. The purpose of this study is to investigate the main reasons of credit crunch in Iranian banking system including economic and balance sheet structures by GMM econometric model. In order to test credit crunch in Iranian banking system, we use dummy variable. In this case we consider credit crunch dummy variable by capital ratio as an effective variable on growth of loan. The multiplied credit crunch dummy by capital ratio is significantly negative and this result show that the capital ratio could be affected on credit crunch in Iranian banking system.

Keywords

Banking system Credit crunch Credit supply Liquidity 

JEL Classification

G21 G32 G28 C23 

References

  1. Albertazzi, U., & Marchetti, D. J. (2009). Credit crunch, flight to quality and evergreening: An analysis of bank-firm relationships after Lehman. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.364.4664&rep=rep1&type=pdf.
  2. Barone, G., de Blasio, G., & Mocetti, S. (2016). The real effects of credit crunch in the great recession: Evidence from Italian provinces. Temi di discussione della banca d’italia no. 1057, Bank of Italy.Google Scholar
  3. Bayoumi, T. (1998). Monetary policy issues. Japan, Selected issues, 80–100. IMF: Staff Country Report.Google Scholar
  4. Benauer, T., & Koubi, V. (2004). Banking crisis vs. credit crunch? A cross-country comparison of policy responses to dilemmas in banking regulation. Business and Politics, 6(2), Article 2.Google Scholar
  5. Berger, A., & Udell, G. F. (1995). Relationship lending and lines of credit in small firm finance. Journal of Business, 68, 351–381.CrossRefGoogle Scholar
  6. Bernanke, B. S., & Lown, C. S. (1991). The credit crunch. Brookings Papers on Economic Activity, 2, 205–247.CrossRefGoogle Scholar
  7. Bijapur, M. (2010). Does monetary policy lose effectiveness during a credit crunch? Economics Letters, 106(1), 42–44. January, Elsevier.Google Scholar
  8. Borensztein, E., & Lee, J. W. (2002). Financial crisis and credit crunch in Korea: Evidence from firm-level data. Journal of Monetary Economics, 49(4), 853–875.Google Scholar
  9. Brinkmann, E. J., & Horvitz, P. M. (1995). Risk-based Capital standards and the credit crunch. Journal of Money, Credit and Banking, 27(3), 848–863.Google Scholar
  10. Clair, R. T. (1989). Credit shortage slows texas recovery. Federal Reserve Bank of Dallas Southwest Economy, January.Google Scholar
  11. Dollar, D., & Hallward-Driemeier, M. (2000). Crisis, adjustment, and reform in Thailand’s industrial firms. The World Bank Research Observer, 15(1), 1–22.  https://doi.org/10.1093/wbro/15.1.1.
  12. Erdinç, D. (2009). From credit crunch to credit boom: Transitional challenges in Bulgarian banking, 1999–2006., MPRA Paper 10735 Germany: University Library of Munich.Google Scholar
  13. Gertler, M., & Gilchrist, S. (1993). Monetary policy, business cycles, the behavior of small manufacturing firms, Finance and Economic Discussion Series No. 93-4, Board of Governors of Federal Reserve System.Google Scholar
  14. Keran, M. W. (1992). The regulatory recession? Economic Review. The Prudential Insurance Company of America, October.Google Scholar
  15. Owens, R. E., & Schreft, S. L. (1992). Identifying credit crunches. Federal Reserve Bank of Richmond Working Paper No. 92–1, March.Google Scholar
  16. Pavel, C., & Rosenblum, H. (1985). Banks and nonbanks: The horse race continues. Federal Reserve Bank of Chicago Economic Review, May/June, 3–17.Google Scholar
  17. Peek, J., & Rosengren, E. S. (1995). Bank regulation and the credit crunch. Journal of Banking and Finance, 19, 679–692.Google Scholar
  18. Presbitero, A. F., Udell, G. F., & Zazzaro, A. (2014). The home bias and the credit crunch: A regional perspective. Journal of Money, Credit and Banking, 46(s1), 53–85.  https://doi.org/10.1111/jmcb.12078.CrossRefGoogle Scholar
  19. Samolyk, K. A. (1991). A regional perspective on the credit view. Federal Reserve Bank of Cleveland Economic Review, Second Quarter, 27–38.Google Scholar
  20. Syron, R. F. (1991). Are we experiencing a credit crunch? Federal Reserve Bank of Boston New England Economic Review, July/August, 3–10.Google Scholar
  21. Watanabe, W. (2007). Prudential regulation and the credit crunch: Evidence from Japan. Journal of Money, Credit and Banking, 39(2–3), 639–665.Google Scholar
  22. Woo, D. (1999). In search of “Capital Crunch”: Supply factors behind the credit slowdown in Japan. IMF Working Papers, 99(3), 1.Google Scholar

Copyright information

© Springer Nature Switzerland AG 2018

Authors and Affiliations

  • Mahshid Shahchera
    • 1
    Email author
  • Fatemeh Noorbakhsh
    • 2
  • Homa Monfared
    • 2
  1. 1.Assistance of Monetary and Banking Research Institute, Central Bank of IranTehranIran
  2. 2.Research Assistant of Monetary and Banking Research Institute, Central Bank of IranTehranIran

Personalised recommendations