The Study of the role of the banking industry in an open economy via Dynamic Stochastic General Equilibrium model

In this paper we use a separate production function( Cobb-Douglas) for banking industry and investigate the effect of banking sector’s performance on macroeconomic variable , like production ,interest rate spread , loan and deposit interest rate, investment, consume, employment and….. . like a lot of developing countries , who don’t have enough resources for investment, in this model we suppose that all of resources are provided by borrowing from abroad. After using  banking technology shock and tax shock on banking sector labor, the accuracy of results have proved by using Bayesian statistics including Markov chain Monte carlo  and comparison between prior and posterior distribution. In this model’s framework , a positive banking technology shock will make the borrowing from international supplier much easier and that leads to expand loan’s supply and consequently the transmission of  supply function to right side and make it possible to meet all of demands that have been have been enlarged as the result of this shock. Because this shock have raised the level of bank’s deposits too. The increasing in capital level finally leads to high level of production and employment. On the other hand the tax shock on banking sector labor will decrease the investment and consequently production and employment by falling the level of deposits and loans. The foreign interest rate Is also one of the most important  effective factors that can affect the financial and real variable of economics.