Research Paper
Monetary economics
Hosein Samsami; Hesam Hasanpour; Mohammad Ali Nowjavan
Abstract
As a result of the accumulation of fictitious assets in the bank balance sheet, the banking system has been faced with insolvency in recent years which has had grave impacts on both the money and real sectors. This study aims to investigate the causes of the increase in liquidity through the creation ...
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As a result of the accumulation of fictitious assets in the bank balance sheet, the banking system has been faced with insolvency in recent years which has had grave impacts on both the money and real sectors. This study aims to investigate the causes of the increase in liquidity through the creation of fictitious assets and to examine the effects of these assets on macroeconomic variables, which has not been investigated in other studies. Using a pattern of structural macro-econometric and the ARDL method, this paper investigates the impact of removing fictitious assets from the bank balance sheet on the money supply and other macroeconomic variables in Iran from the first season of 2006 to the fourth season of 2022. The designed macro-econometric pattern includes 8 behavioral equations and 7 identity equations. Two scenarios have been developed in this paper: The first scenario surveys the impact of effective money (the aggregate money minus fictitious assets) on macroeconomic variables. The second scenario examines the impact of aggregate money on macroeconomic variables. The findings indicate that the existence of fictitious assets in the bank balance sheet causes an increase in the money supply and reduces the quality of money. However, fictitious assets have no impact on the real sector and the effective money’s influence on macroeconomic variables such as production, investment, employment, and consumption is more than the aggregate money’s impact on these variables. Also, the results show that ineffective money merely increases the price levels.
