The Effect of Credit Constraints on Real Economy in Iran

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Heydari Nejad, Mohaddeseh | 2019

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 52033 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Madanizadeh, Ali; Mahmoudzadeh, Amineh
Abstract:
In this paper we empirically explore the bank lending channel and firm borrowing channel in Iran. Using the Embezzlement Scandal of 2011 as an instrumental variable for change in banks’ lending behavior, we identify the effect of credit constraints on borrowers’ performance. We use the firm-bank level data of short term loans from 2007- 2014 to maintain the goal. Results show that the banks’ lending behavior changes as a result of embezzlement shock and the borrowers’ performance get affected respectively. We show that the troubled banks reduce their lending by about 2.35 percent as compared to non-troubled ones. The results suggest that 10 percent decrease in loan supply, reduces the firms’ production by about 3.5 percent
Keywords:
Bank-lending Channel ; Firm Borrowing Channel ; Firm's Performance ; Macro-Financial Linkages ; Fixed Effect Model