The effect of selling government bonds to banks on liquidity

Abstract

In recent years, one of the challenges facing governments has always been the issue of financing the budget deficit. Since 1395, the sale of bonds has started to compensate for the budget deficit and these government bonds have also been sold to banks. The purpose of this study is to investigate the effect of selling government bonds to compensate the budget deficit on liquidity The data used in this research is seasonal and for the period 1372:Q2-1400:Q1 and the estimations were done using the system of simultaneous equations and in the framework of recursive models and by the ordinary least squares method .The results indicate that, According to the first equation, the sale of bonds to banks has a positive relationship with the government's debt to banks, in fact, the sale of bonds to banks has increased the government's debt to banks. In the second equation, it was found that the government's debt to the banks has a positive relationship with the banks' debt to the central bank, Therefore, it can be said that the sale of bonds to banks has increased the debt of banks to the central bank. Also based on liquidity equation, The positive relationship between government debt to banks and liquidity and the positive relationship between bank debt to the central bank and liquidity has been proven, Therefore, it can be said that the sale of bonds to banks has led to an increase in liquidity.Keywords: deficit financing, sale of bonds to the bank, liquidity, System of simultaneous equations and Recursive Models .

Keywords

• deficit financing
• sale of bonds to the bank
• liquidity
• system of simultaneous equations and recursive models