The Impact of Removing Fictitious Assets from Bank Balance Sheet on Money Supply and Other Macroeconomic Variables

As a result of the accumulation of fictitious assets in the bank recent years, which has had grave impacts on both the money and real sectors. this study aims to comprehensively investigate the fundamental factors contributing to the expansion of liquidity arising from the creation of fictitious assets and to meticulously evaluate the subsequent repercussions of these assets on macroeconomic variables. notably, this specific research domain remains relatively unexplored within the existing corpus of academic scholarship. using a pattern of structural macro- econometrics and the ardl method, this paper investigates the impact of removing fictitious assets from the bank balance sheet on the money supply and other macroeconomic variables in iran from the first season of 2006 to the fourth season of 2022. the designed macro-econometrics pattern includes eight behavioral equations and seven identity equations. two scenarios are explored: the first examines the impact of effective money (aggregate money minus fictitious assets) on macroeconomic variables, while the second investigates the effect of aggregate money on these variables. the findings reveal that fictitious assets on bank balance sheets increase the money supply but diminish its quality. however, fictitious assets have no discernible impact on the real sector. moreover, effective money exerts a more substantial influence on macroeconomic variables such as production, investment, employment, and consumption than aggregate money. the results also demonstrate that ineffective money primarily contributes to rising price levels.balance sheet, the banking system has been faced with insolvency in