Economic Research and Perspectives

Economic Research and Perspectives

Investigating the Impact of Financial Development and Financial Stability on Iran's Economic Growth Using the Generalized Method of Moments (GMM)

Document Type : Original Research

Authors
Azadeh Arab 1
Ahmad Sarlak 2
Mojtaba Ghiasi 3
Maryam Sharifnezhad 2
1 Ph.D. Candidate in Economics, Department of Economics, Arak Branch, Islamic Azad University, Arak, Iran
2 Assistant Professor, Department of Economics, Arak Branch, Islamic Azad University, Arak, Iran
3 Assistant Professor, Department of management, Malayer Branch, Islamic Azad University, Malayer, Iran
Abstract
Financial development and stability and their relationship with economic growth is one of the most important and influential issues in economic growth. Therefore, economists have studied this issue by exerting different conditions. The main purpose of this study is to evaluate the impact of financial development and financial stability on Iran's economic growth using the generalized method of moments (GMM) during 1992-2019. The results show positive and meaningful effects of financial development and financial stability on economic growth. The variables of lagged economic growth, education, fixed investment and trade liberalization have positive and significant effects on economic growth, while, inflation, government expenditure and active population have negative impacts on economic growth. Therefore, considering the important role of education, it is recommended to government to invest in this sector and upgrade the production structure, make the necessary structural reforms in the capital market and banking system, direct credit and liquidity to strengthen private sector production, as well as improve the level and composition of government spending in order to increase production efficiency.
Keywords
Financial Development
Financial Instability
economic growth
Generalized Method of Moments
Time Series

Subjects

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Economic Research and Perspectives
Volume 21, Issue 4
Winter 2022
Pages 67-86