Investigating the Relationship between the Facility Interest Rate and the Bank Deposit Interest Rate in Iran

The facility interest rate is one of the most important macroeconomic variables. The bank facility interest rate is associated with other macro-economic variables, one of which is the bank deposit interest rate. Using the time series data of the 1973-2017 period and the simultaneous equation system, the researchers esti- mated four equations using the three-stage least squares method. The result of estimation of the equation s indicate that there are (i) a significant positive rela- tionship between the bank deposit interest rate and the facility interest rate in the Iranian economy during this 45-year period,(ii) a significant positive relationship between the facility interest rate and the deposit interest rate,(iii) a significant positive relationship between the liquidity level and the inflation rate, and there is a positive and relatively significant relationship between the exchange rate and the inflation rate, (iv) a significant positive relationship between the facility interest rate and the credit risk