212 Int. J. Monetary Economics and Finance, Vol. 9, No. 2, 2016 Copyright © 2016 Inderscience Enterprises Ltd. The role of money multiplier in monetary transmission mechanism in Iran (bank lending and money supply) Jafar Haghighat* and Tanaz Salahesh Faculty of Economics, University of Tabriz, Iran Email: jafarhaghighat@yahoo.com Email: tanazsalahesh@yahoo.com *Corresponding author Abstract: Increasing trend of inflation together with high rate of unemployment in Iran, have brought more attention to the effects of monetary policy and central bank power on macroeconomic indexes. As the effect of money multiplier increases, the power of the central bank on the monetary system decreases. Previous researches such as monetary attitude assumes money supply exogenous and the most important factor influencing the monetary policies while post-Keynesians assume money endogenous and they believe in other channels for monetary transmission mechanism. This study focuses on the credit channel and explores the role of money multiplier considering the bank lending channel. The analyses of this study are based on the monthly data of 2 March 2008 up to 20 March 2013 and VAR estimations. The results approve the bank lending channel but not the role of money multiplier in transmission mechanism in Iran. Keywords: monetary transmission mechanism; lending channel; reservable deposits; managed liabilities; money multiplier. Reference to this paper should be made as follows: Haghighat, J. and Salahesh, T. (2016) ‘The role of money multiplier in monetary transmission mechanism in Iran (bank lending and money supply)’, Int. J. Monetary Economics and Finance, Vol. 9, No. 2, pp.212–223. Biographical notes: Jafar Haghighat is a Professor of Economics at the University of Tabriz in Iran. He received his PhD in Economics from the University of Pune (India) in 1997. His recent publications include Haghighat, J. (2011) ‘Endogenous and exogenous money: an empirical investigation from Iran’, Journal of Accounting, Finance and Economics, Vol. 1, No. 1, pp.61–76; Haghighat, J. (2011) ‘Real money demand, income, and interest rates in Iran: is there a long-run stable relation?’, World Journal of Social Sciences, Vol. 1, No. 2, pp.95–107. Tanaz Salahesh is a PhD student at the University of Tabriz in Iran. Her recent publications include ‘The effects of e-money introduction on money multiplier, case study of Iran’ (presented at the Eight Wuhan International Conference on E-Business, China); Tanaz Salahesh and Ehsan Rasuli (May 2009), ‘Influence of self-efficacy, teaching and training and individual attitude on adoption of online stock trading by investors (case study of Iran)’, published in the 2nd International Conference on Financial Services Marketing, November 2010.