Analyzing the impact process of banks and private institutions on macroeconomic indicators

Banks are among the main sectors of any country's economy. Nowadays, one of the questions raised about Iran's economy is whether the expansion of banks and nongovernmental credit institutions has led to achieving the goals of increasing competitiveness, efficiency, and overall economic growth.  The present study aimed to investigate the effect of the expansion of banks and nongovernmental credit institutions on private sector investment, employment, and gross domestic product in Iran from March 2001 to July 2020. To do this, first, a special and appropriate index was created to evaluate the effectiveness of banks and nongovernmental credit institutions. Then, the index was put alongside the equations of gross domestic product, private sector investment, employment, and liquidity and estimated within the framework of a system of simultaneous equations using the 3SLS system. After that, the effects of the index were assessed through the two channels of the liquidity effect and distributive effect. The results demonstrated that during the study period, the formation and expansion of banks and non-governmental credit institutions had no significant effect on private sector investment, employment, and gross domestic product.