THE SURVEY OF THE FINANCIAL DEVELOPMENT INDICATORS CAUSALITY RELATIONSHIP WITH ECONOMIC GROWTH IN IRAN

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SALIMIFAR MOSTAFA; RAZMI MOHAMMAD JAVAD; ABOU TORABI MOHAMMADALI

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Journal: Journal of Quantitative Economics Year:2010 | Volume:7 | Issue:1 (24) Page(s): 75-103

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Title

THE SURVEY OF THE FINANCIAL DEVELOPMENT INDICATORS CAUSALITY RELATIONSHIP WITH ECONOMIC GROWTH IN IRAN

Author(s)

SALIMIFAR MOSTAFA | RAZMI MOHAMMAD JAVAD | ABOU TORABI MOHAMMADALI | Issue Writer Certificate

Keywords

FINANCIAL DEVELOPMENTQ2

ECONOMIC GROWTHQ2

GRANGER CAUSALITYQ2

PRINCIPLE COMPONENT ANALYSISQ3

MULTILATERAL INDEX OF FINANCIAL DEVELOPMENTQ3

Abstract

In attempt to determine causes of ECONOMIC GROWTH, FINANCIAL DEVELOPMENT is a basic concept. The key question is whether the causality running from FINANCIAL DEVELOPMENT to ECONOMIC GROWTH, or vice versa. Some economists argue that the financial sector does not have any effect on the real sector of economy. However, a large body of empirical research has found a robust relationship between FINANCIAL DEVELOPMENT and ECONOMIC GROWTH. In order to study FINANCIAL DEVELOPMENT in Iran, we use 5 indictors: the ratio of currency on hold to money stock (CM), the ratio of liquid liabilities to GDP (LLY), the ratio of credit allocated to private enterprises to total domestic credit (PRIVATE), credit allocated to private enterprises to GDP (PRIVY), ratio of commercial banks domestic assets to the banking system assets (BANK). For testing causality relationship between FINANCIAL DEVELOPMENT and ECONOMIC GROWTH in terms of the above indicators, we use GRANGER CAUSALITY test based on an autoregressive model, unit root and Cointegration tests. The results revealed that in the case of Iran, there is a two-way long-run causality relationship between LLY and ECONOMIC GROWTH. Also, one-way long-run causality relationship from PRIVY to ECONOMIC GROWTH, and so for multilateral index. In short-run the results suggest that causality running from GDP to PRIVY, but for other indicators the GRANGER CAUSALITY is not accepted.

Cites

A SURVEY ON FINANCIAL DEPTH ON MACROECONOMIC VOLATILITY

References

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APA: Copy

SALIMIFAR, MOSTAFA, RAZMI, MOHAMMAD JAVAD, & ABOU TORABI, MOHAMMADALI. (2010). THE SURVEY OF THE FINANCIAL DEVELOPMENT INDICATORS CAUSALITY RELATIONSHIP WITH ECONOMIC GROWTH IN IRAN. JOURNAL OF QUANTITATIVE ECONOMICS (QUARTERLY JOURNAL OF ECONOMICS REVIEW), 7(1 (24)), 75-103. SID. https://sid.ir/paper/110801/en

Vancouver: Copy

SALIMIFAR MOSTAFA, RAZMI MOHAMMAD JAVAD, ABOU TORABI MOHAMMADALI. THE SURVEY OF THE FINANCIAL DEVELOPMENT INDICATORS CAUSALITY RELATIONSHIP WITH ECONOMIC GROWTH IN IRAN. JOURNAL OF QUANTITATIVE ECONOMICS (QUARTERLY JOURNAL OF ECONOMICS REVIEW)[Internet]. 2010;7(1 (24)):75-103. Available from: https://sid.ir/paper/110801/en

IEEE: Copy

MOSTAFA SALIMIFAR, MOHAMMAD JAVAD RAZMI, and MOHAMMADALI ABOU TORABI, “THE SURVEY OF THE FINANCIAL DEVELOPMENT INDICATORS CAUSALITY RELATIONSHIP WITH ECONOMIC GROWTH IN IRAN,” JOURNAL OF QUANTITATIVE ECONOMICS (QUARTERLY JOURNAL OF ECONOMICS REVIEW), vol. 7, no. 1 (24), pp. 75–103, 2010, [Online]. Available: https://sid.ir/paper/110801/en

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