| Abstract: |
This study aims to identify the macroeconomic factors influencing the
likelihood of a banking crisis in Iran, with a particular focus on
macroprudential policy. We employed a discrete econometric model
(Logit/Probit) using data from 2011 to 2023. The independent variables include
the loan-to-deposit ratio (LTD) as a proxy for macroprudential policy, the
interbank interest rate as a proxy for monetary policy, as well as the
inflation rate and exchange rate volatility as indicators of macroeconomic
instability. The positive and significant coefficient of LTD confirms that
liquidity risk arising from excessive credit expansion is the main domestic
factor increasing the probability of a crisis. The strong and positive
coefficients for inflation and exchange rate volatility suggest that
macroeconomic and currency shocks threaten financial stability by
deteriorating asset quality and increasing loan defaults. The coefficient for
the interbank rate implies the dominance of the disciplinary and supervisory
effects of monetary policy over liquidity risk, meaning that a targeted
increase in the policy rate by the central bank effectively reduces the
probability of a crisis by imposing higher costs on riskier banks. Overall,
the findings indicate that financial stability in Iran is influenced by
short-term liquidity management and macroeconomic shocks, and that
macroprudential policy plays an effective role in curbing risk-taking behavior. |