In this study، the impact of some institutional factors such as، macroeconomic conditions and country's political stability on the efficiency of Iranian's banking system during 1372-1387، is investigated. The Vector Auto Regression analyses are chosen for this purpose. We found that، in Iranian banking system، on average، banks are able to save 35-45 percent of their total cost if they were operating efficiently. Another important finding of the paper is that in Iranians context، there is a significant and negative relationship exists between inflation rate indexes as a proxy for macroeconomic stability condition and banking efficiency.

JEL Classification: G21, O16, F32