The Effect of Financial Development and Its Size on Economic Growth with a Nonlinear Approach in Iran

Subject Areas : Financial Economics

Sedigeh Dodangeh ¹ , Seyyed Shamsuddin Hosseini ² , Farhad Ghaffari ³

1 - Department of Economics, Research Sciences Unit, Islamic Azad University, Tehran,
2 - Department of Economics, Faculty of Economics, Allameh Tabatabai University, Tehran, Iran (corresponding
3 - Department of Economics, Research Sciences Unit, Islamic Azad University, Tehran

Received: 2023-04-11 Accepted : 2023-06-17 Published : 2023-06-22

Keywords: Economic Growth, O40, O16, Keywords: Financial Development, financial sector size, threshold regression JEl Classification: C10,

Abstract :

AbstractWhile it is economically well established that the financial sector is interrelated, empirical estimates of the growth of these textual results are generally presented. On the other hand, it will be different for several time series assessments at different levels of economic growth and in terms of time requirements, so it seems that estimating linear models to examine macro-relationships is challenging. The aim of this study was to investigate the relationship between the development and size of the financial sector in the Iranian economy with economic growth in the years 1350-1399 using the non-linear regression method of Astana. The results show that there are three different regimes for the effect of changes in financial sector size and financial development on economic growth. In economic growth rates, only financial differences affect economic growth. This effect in the second regime, ie between the economic growth rates of 0 to 8.6%, is weak but positive and significant, and in the economic growth rate above 8%, both financial size and financial development have a positive and significant effect on economic growth.

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