Economic liberalization policy has been among the major concern of the governments during the last few decades. However, its impact on economic growth is still a controversial issue. The aim of this paper is to examine the impact of trade liberalization and financial development on economic growth in Iran using annual observations over the period 1973-2007. The current study would use ARDL technique to estimate the empirical model.
The findings of this paper indicate that there is a long run positive and significant relationship between trade liberalization and financial development and economic growth in Iran over the period of the study. The error correction coefficient is around 0.32 showing that the adjustment towards the long run equilibrium takes place within almost three years. The Granger causality test indicates that causality runs from trade liberalization and financial development to GDP.