Inflation is one of the fundamental challenges in macroeconomics that directly affects many macroeconomic variables such as sustainable economic growth, investment, public welfare, and financial stability. In this context, the most crucial function and ultimate objective of monetary policy is inflation control and price stability. Therefore, the central bank utilizes a set of policy instruments in an effort to steer the inflation trend toward its targeted path and prevent its disruptive fluctuations.

To achieve this objective, the central bank in recent years has primarily employed three policy instruments: the interest rate, the required reserve ratio, and the quantitative control of the quasi-banking system's balance sheet, to curb inflation and minimize inflationary deviations. However, since banks and credit institutions constitute the primary transmission channel of monetary policies, the most pertinent question raised is: What impact does the banking system's imbalance have on the efficacy of monetary policy instruments in achieving the aforementioned goal?

Hence, this study, while examining the status and causes of the banking system imbalance in the country, addresses the following questions: What effect does this imbalance have on the efficacy of the three aforementioned instruments in controlling inflation? In this regard, based on a Structural Vector Autoregression (SVAR) econometric model, it was concluded that under conditions of low imbalance, the interest rate instrument is most effective, followed by the required reserve ratio. Conversely, under conditions of high imbalance, the quantitative balance sheet control instrument is most effective, followed by the required reserve ratio, in controlling inflation and minimizing inflationary deviations.

Finally, it is recommended that the country's monetary policymaker utilize conventional price-based instruments under conditions of low banking system imbalance and employ quantitative instruments under conditions of high banking system imbalance to achieve its most critical policy objective.