The Role of Good Governance in Mitigating the Effects of Credit Crunch in Iran's Industrial Sector

Document Type : Original Article

Authors

Zeinab Shabani Koshalshahi ¹

Mohammad Taher Ahmadi Shadmehri ²

Ali Akbar Naji Meidani ³

Mohammad Ali Falahi ⁴

¹ Ph.D. Student of Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

² Professor of Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran.

³ Associate Professor of Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran.

⁴ Professor of Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

https://doi.org/10.22067/mfe.2024.89019.1437

Abstract

This paper tried to study the effect of credit crunch on the stagnation of industrial sector and their bilateral relationship. In addition, the role of good governance on the intensity of the relationship between these two will be examined. For this purpose, the MS-IVAR model is used. The credit crunch index is calculated based on the maximum available information and its main determinants. Data were collected with annual frequency (1996- 2020) from the most recent statistics published by the Central Bank of the Islamic Republic of Iran and World Bank website. The results showed that credit crunch had a positive significant effect on the stagnation of industrial sector. In addition, there is an intensified relationship between these variables. However, good governance index influence can significantly reduce the severity of effect of credit crunch, as demonstrated through interactive analysis. Therefore, promoting good governance can be mentioned as a solution to compensate for the negative effect of credit crunch on the stagnation of industrial sector

Keywords

Credit Crunch

Good Governance

Industrial Sector

MS-IVAR Model

Economy of Iran

Subjects

• Financial monetary economy

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