Examining the effects of productivity shock on nominal prices of the economy in the conditions of banking crisis

Abstract

According to the conditions of the banking system in recent years, signs of a banking crisis have been observed in Iran's economy, and considering the high share of the banking system in financing Iran's economic activities, in this article, the effects of productivity impulse on the variables of inflation rate, Nominal interest rate, capital rental rate, interest rate of deposits and interest rate of granting facilities have been investigated using dynamic general equilibrium model in the form of two limit scenarios of no crisis and presence of banking crisis using the data of Iran's economy during 2018-2019. The results show the less impact of the productivity impulse in the case of banking crisis compared to its non-occurrence and incomplete adjustments in banking crisis conditions.

Keywords

• banking crisis
• stochastic dynamic general equilibrium model
• productivity shock
• inflation rate
• nominal interest rate