The Impact of Monetary Sector Development on Iranian Banks’ Loan Supply

  Banks play an important role in economic development. The access to bank financing allows many firms to carry out investment projects, which prompt economic development. Numerous studies have underlined that monetary policy is a key element in determining banks’ loan supply. Monetary development raises the scope of monetary policy and improves policy performance. This study examines the effect of monetary development on banks’ loan supply in various banks in Iran. In this Article, Iranian banks were categorized into three types; i.e. state, private, and Principle 44. The analysis is performed using the Seemingly Unrelated regression over the period of 2011 to 2017. The results indicated that monetary development has positive and significant effects on the banks’ loan supply by various types of Iranian banks, as a result, banks are following the policies of the central bank. The results also showed that state banks and Principle 44 banks were more influenced by central bank policies than private banks, or that most of these policies were accompanied.Other variables include interest rates on facilities, GDP and internal variables of banks, capital adequacy ratio, and share of cash assets from total assets and size of the bank also have a significant impact in this regard.