investigating the impact of Oil Price shocks and Economic Sanctions on Banks' Liquidity Creation in Iran

Document Type : Research Paper


1 Assistant Professor, Department of Financial Management and Insurance, Faculty of Management, University of Tehran, Iran

2 Associate Professor of Theoretical Economics Department, Faculty of Economics, University of Tehran, Iran

3 PhD Student, School of Management, University of Tehran, Iran


Liquidity Creation is one of the roles that banks play in the theory of financial intermediation, and its components are theoretically related to the economy. In this study, using the methodology of Berger and Bouwman (2009) to compute banks' liquidity creation, we examine the impact of economic sanctions, as well as oil price shocks on the liquidity creation of Iranian banks. Using annual unbalanced panel data and systematic GMM method, the results show the negative and significant effects of oil price shocks on banks' liquidity creation. It has also been shown that oil price shocks have a direct negative effect on liquidity creation within the balance sheet as well as the total liquidity creation. Economic sanctions also hurt liquidity creation and exacerbate the negative effects of oil price shocks. The results of this study provide good policy applications for monetary policymakers.
JEL Classification: C23, F51, G21 


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Volume 55, Issue 2 - Serial Number 131
September 2020
Pages 389-409
  • Receive Date: 02 August 2019
  • Revise Date: 12 May 2020
  • Accept Date: 12 September 2020
  • First Publish Date: 12 September 2020