Indicators of Financial Development and Their Impact on the Economic Growth (Evidence from the Economy of Iran During 1978-2013)

چکیده مقاله

Financial market is one of the key effective factors of economic growth. The economists believe that the financial markets are the dynamic engines of the economic growth and ignoring the link between financial department and economic growth is an indicator of imperfect economic growth. The major question is about whether the financial development is the reason of economic growth or it is affected by the economic growth. This study intends to use Granger causality test and vector auto regression (VAR), Dickey-Fuller unit root test and ARDL model to answer this question. To measure the financial development of Iran, instrumental, structural, efficiency and fundamental indicators of financial development are employed. The findings reveal that there is a mutual causal relationship between the depth of financial development and economic growth; however, a one-directional relationship is found between the efficiency index and general index of financial development towards the economic growth. In short term, only a one-direction causal relationship between the gross domestic production (GDP) and efficiency index of financial development is confirmed. The Granger causality test is not confirmed for the remaining items.

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