Bank-Based Endogenous Liquidity Creation and Distribution across Crisis Regimes: A Balance-Sheet DSGE Analysis for Iran

This paper develops an endogenous‑money DSGE model to analyze how liquidity creation and its distribution across depositors evolve under two structurally different crisis regimes—the 2007–2008 global financial crisis and the 2020–2021 pandemic shock. Unlike existing DSGE studies that focus on credit frictions while abstracting from liquidity distribution, the model explicitly embeds bank balance‑sheet‑based liquidity creation within a regime‑dependent macroeconomic framework. The model is calibrated using annual data for 2000–2024 from a bank‑based emerging economy (Iran) and estimates a high degree of persistence in the lending interest rate process (ρ = 0.97). Simulation results reveal that a negative lending‑rate shock produces asymmetric macro‑financial responses across regimes. In normal periods, lower lending rates expand credit, investment, and output, confirming the effectiveness of the traditional interest‑rate channel. During crisis regimes, however, the same policy shock yields contractionary outcomes—output and investment decline while inflation and bank profitability rise—reflecting a regime‑specific breakdown of the credit channel under liquidity stress. The results further show that bank borrowing from the central bank and deposit concentration decline slightly during crises, indicating an endogenous adjustment in liquidity distribution driven by balance‑sheet constraints rather than policy targeting. Overall, the model highlights the dual nature of endogenous liquidity in bank‑based emerging economies: a stabilizing force in tranquil periods but a source of real‑sector contraction and systemic dependence under financial distress.