Document Type : ORIGINAL ARTICLE
Authors
Department of Economics, Zanjan Branch, Islamic Azad University, Zanjan, Iran
Abstract
In this paper, the effects of the decline in global oil prices on the macro - economic variables of Iran have been analyzed by designing a dynamic global economic balance model with respect to banking sector and credit risk of bul lion. based on the results of modeling for the iranian economy, the decrease in oil prices increases the exchange rate and reduces the demand for imported goods, which in the short term, through substitution effect, boosts domestic production and employment of unemployed people on a temporary basis. However, the drop in oil production and the monetary base constraint and the reduction in lending reduce total production in the subsequent period. on the other hand, inflation has increased temporarily, first because of increased demand for domestic production and then it has decreased because of the recession in the economy. the ability of firms to repay the received facilities is reduced and debt default is increased by reducing production followed by decreasing revenue. This would reduce the profitability of banks, which would limit the supply of credit more severely and weaken production and employment more severely. This cycle, combined with falling tax revenues, is pushing the economy into a sustained recession. Accordingly, dependence on oil and credit risk exacerbate the vulnerability of the economy. based on the results, it is suggested to increase economic resilience by adding to income sources, strengthening of waste sectors, and improving bank risk management.
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