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The Role of Macroprudential Policy in Managing Credit Risk and Enhancing Financial Stability in Response to Oil Price Shocks: A DSGE Approach
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Maryam Houshangi *1   , Ali Emami maybodi |
| 1- , m.m.houshangi@gmail.com |
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Abstract: (15 Views) |
This study uses a New Keynesian DSGE model within an open-economy setting. The model incorporates endogenous credit risk, allowing us to capture the feedback between the banking sector and the real economy. We apply this framework to analyse the impact of negative oil price shocks and to assess how macroprudential policies can mitigate economic volatility and strengthen financial stability. The results indicate that, in the baseline model, a negative oil shock reduces foreign exchange revenues, increases the exchange rate, and constrains money supply, which, through reduced bank lending, lowers output, employment, and consumption. However, in the short term, due to decreased imports and substitution effects, demand for domestic goods rises, leading to a temporary expansion in the non-oil sector. Comparing a model without macroprudential policy to one with a capital adequacy-based macroprudential rule shows that implementing such a policy mitigates the adverse effects of oil shocks on bank lending, thereby enhancing banking system resilience. Furthermore, the results for a loan-to-value-based macroprudential rule indicate that its effects are stronger and faster, as it directly responds to output fluctuations. Moreover, a sensitivity analysis, based on simulating different levels of the macroprudential capital adequacy ratio, shows that increasing the intensity of this policy more effectively stabilizes credit fluctuations and business cycles. Overall, the findings indicate that macroprudential policies play a crucial role in reducing the vulnerability of the Iranian economy to oil price shocks and in enhancing financial stability.
JEL Classification: E27, E52, Q43.
Keywords: Macroprudential policy, oil price shocks, financial stability, dynamic stochastic general equilibrium model.
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| Keywords: JEL Classification: E27, E52, Q43.
Macroprudential policy, oil price shocks, financial stability, dynamic stochastic general equilibrium model. |
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Full-Text [PDF 1734 kb]
(18 Downloads)
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Type of Study: Thesis(PhD.) |
Subject:
مديريت ريسك
Received: 2025/08/4 | Accepted: 2026/04/6 | Published: 2026/10/2 | ePublished: 2026/10/2
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