Investigating the effect of financial depth on money market and macroeconomic variables: stochastic dynamic general equilibrium approach

Due to the numerous financial crises, including the 2008 crisis that occurred in the world, it started from countries with large economies and its aftershocks spread to other countries, including countries with less financial stability. Economists are trying to come up with policies to manage financial crises optimally. Therefore, it is necessary to study the parameters affecting financial stability. Due to exchange rate fluctuations in Iran and the resulting financial instability, Iran also did not survive the 2008 financial crisis despite sanctions. The purpose of this paper is to manage the financial crisis in Iran by determining one of the indicators of financial development, which is examined through the effect of shock on macroeconomic variables. According to the purpose of this research, determining the indicators of financial depth in Iran's economy and also determining the effect of the indicator of financial depth on macroeconomic variables in a general equilibrium model are among the cases that clarify the innovation of the research.  The designed model includes households, enterprises, government and monetary authority. The model has been validated using the time series data of the Central Bank from 1357 to 1396. In this study, the effect of financial depth shocks on exchange rate, oil and government expenditures has been entered into the system. The results of the simulation and analysis of functions confirm the effect of financial depth. Also, the effect of oil shock is much greater than other shocks.