The Research Department of Economics and Management of Tadbir Nikan Business, Marketing, and Finance Open In Press 2024 08 01 Examining the Effect of Parallel Market Volatility and Deposit Breakage Rates on Long-Term Bank Deposits with the Aim of Estimating the Optimal Investment Portfolio Examining the Effect of Parallel Market Volatility and Deposit Breakage Rates on Long-Term Bank Deposits with the Aim of Estimating the Optimal Investment Portfolio 158 175 EN Journal Article 2024 04 17 <p>In recent decades, the role of the banking system in channeling financial resources toward productive activities and supporting the economic stability of countries has received increasing attention. One of the most important policy instruments in this regard is the breakage rate of long-term deposits, which reduces the interest payable to depositors when withdrawals occur before maturity. The main objective of this study is to examine the impact of bank deposit breakage rates on investor behavior in Iran, with an emphasis on the influence of parallel financial markets such as foreign exchange, gold, real estate, and the stock market. In this context, quarterly macroeconomic data of Iran for the period 2009 to 2019 were used, and the Conditional Value-at-Risk Vector Autoregressive (CVaR-VAR) model was employed to analyze the relationships among variables. To better understand dynamic interactions, variance decomposition analysis, impulse response functions, and the Granger causality test were applied. The findings indicate that changes in deposit breakage rates have a significant effect on the volume of bank deposits, and investors, when confronted with profitable opportunities in parallel markets, exhibit notable reactions to breakage rates. In addition, the results show that markets such as gold and foreign exchange exert a stronger influence in stimulating the withdrawal of long-term deposits compared with other markets, and their volatility can affect deposit levels. Based on the findings, implementing targeted and dynamic breakage rates—considering economic conditions and investors’ risk tolerance—can serve as an effective tool for controlling liquidity and preventing turbulence in parallel markets.</p> https://bmfopen.com/index.php/bmfopen/article/download/352/269