Identifying Banking Crisis in Iran

The state-owned banks in Iran have been experiencing crisis, but due to nationalization of banking system there has been no bank runs. In this paper, we identify the occasions of banking crisis in Iran using the money market pressure index and the Markov switching method for the period 1971- 2008. The results show that the banking system in Iran has experienced crisis in certain periods. In particular, the money market pressure index has been critical in periods such as the revolution, war with Iraq, after war reconstruction time, and the most recent extreme government control policy of the banks.