An Investigation of the Financial Development and Financial Volatility on the Economic Growth: The Case of Iran 1955-2006

Subject Areas : Labor and Demographic Economics

Received: 2015-04-25 Accepted : 2015-04-25 Published : 2010-04-01

Keywords: Economic Growth, Financial Development, Financial Volatility,

Abstract :

This paper investigates the effect of financial development and financial volatility on economic growth in short run and long run for the Iranian economy of Iran. To do so, we used a GARCH model for driving the volatility of financial variable and then, we used ARDL model to estimate the relation of financial variables on the economic growth. The indicator of financial development is the ratio of banking system credits for the private sector to GDP and the indicator of financial volatility is its conditional variance. The results represent a negative effect of credit on the real per- capita income in short -run and long run. This negative effect can be made by the inefficiency of Iranian banking system. The effect of financial volatility is also negative and significant in both short run and long- run.

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