Investigating the Effect of Stock and Money Market Shocks on Bank Entrepreneurship with a View on Shadow Banking in Iran

Document Type : RESEARCH PAPER

Authors

1 Ph.D. Candidate, Department of Economics, Tehran Faculty of Economics, University of Tehran, Tehran, Iran.

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

3 Associate Professor, Department of Economics, Tehran Faculty of Economics, University of Tehran, Tehran, Iran

Abstract

For several years, the Iranian economy has been facing a phenomenon called bank entrepreneurship, which has weakened the main role of banks, namely financial intermediation, and has become a challenging issue in the country's banking system. Bank restrictions in the money market, as well as weak laws and infrastructure, have forced banks to enter other markets in a rational response to control their risk. Given the key role of banks in the structure of the economy and the financial system, it is essential to examine the allocation of bank resources in stock market and money market fluctuations; therefore, the purpose of this study is to examine the dimensions of bank entrepreneurship using the literature on shadow banking in Iran. In order to examine this issue, the generalized factor time-variable parameter vector autoregression model (TVP-FAVAR) and seasonal data on non-state commercial banks during the period 2002-2020 were used. The results of this study show that the bank entrepreneurship variable has shown a positive response to stock market and money market shocks. It was also observed that the effect of money market shock on the research variables is greater than that of capital market shock, which is due to the different depth of these two markets. The results obtained from this study show that banks tend to engage in corporate and non-intermediary activities in response to stock and money market shocks. These activities lead to the expansion of shadow banking behaviors.

Keywords

References

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Stable Economy Journal
Volume 6, Issue 3 - Serial Number 19
October 2025
Pages 95-131

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