Explanation of Rent- Producing channels in the Banking System in Iran using the Institutional Political Economy Approach

Document Type : Research Article


1 Faculty Member of Faculty of Economics, University of Tehran

2 Faculty member of faculty of Economics, Allameh Tabatabaee University

3 Faculty of Economics of Tehran University


The main issue of the present article is the identification of rent producing channels in the banking system of Iran. Institutionalist political economy approach is used as the theoretical framework due to the nature of the rent-seeking and, consequently, to the inclusion and interaction of the economic and political variables. In the theoretical part, ownership and regulation system have been introduced as two major channels of rent producing in the banking system. Subsequently, in the experimental part, using the library method and content analysis, for 2005-2015, the performance of the banking system was examined with regard to the above channels and it is shown that although private ownership is a rent producing channel in the banking system in Iran, but the regulation system is more important than that. In this regard, one of the powerful evidences which provides the conditions for producing and expansion of rents is a violation of the “interest- free banking operation” law. Investigating variables such as lending facilities, non-performing loans and the quality of the banking system in relation to productive sectors also indicate that the rule of law in Iran, in the formulation of laws and regulations, as well as the implementation and supervision, has a significant role in supporting this issue. Therefore fundamental reform of regulation system, especially in the implementation and supervision phase, and necessity of institutional reform of the country's economic requirements with the goals of protecting private property and increasing social and economic well-being can modify even the ownership channel to reduce significantly the rent-seeking behavior.


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