The impact of banking crisis and monetary policy instability on private investment and economic growth in Iran

Articles in Press

Document Type : Scientific paper

Authors

1 Faculty member of Economics at University of Mazandarn

2 Retired from Isfahan University

3 PhD student at University of Mazandaran

10.22080/mrl.2026.30382.2209

Abstract

In the current situation of the Iranian economy, it is necessary to identify the factors affecting investment and economic growth, given their importance and vital role. The main purpose of this article is to answer the question of what effect the banking crisis and monetary policy instability have on private investment and economic growth in Iran. For this purpose, annual data of the Iranian economy between 1988 and 2024 and nonlinear Markov switching and STR approaches have been used. The results show that the banking crisis, depending on its severity, has different effects on investment and economic growth; at lower levels, it may lead to increased supervision and directing resources towards productive activities, thereby increasing investment and economic growth, but as the severity of the crisis increases, it will have a significant and negative effect on investment and economic growth, because it reduces access to credit and increases the cost of financing, and therefore reduces investment and economic growth. Monetary policy instability has a negative effect on investment and economic growth, and investment also has a positive effect on economic growth. These findings emphasize the need for careful management of banking crises and monetary policy instability to maintain and sustain investment and economic growth.

Keywords

Main Subjects

Macroeconomics Research Letter

Articles in Press, Accepted Manuscript
Available Online from 21 May 2026

Files

History

  • Receive Date: 28 October 2025
  • Revise Date: 08 May 2026
  • Accept Date: 21 May 2026

Share

How to cite

Statistics