Iranian Journal of Economic Research

The Impact of Financial and Banking Structure on Real Sector Growth in Iran

Document Type : Research Paper

Authors

Mohammad Ali Aboutorabi 1
Mehdi Hajamini 2
Sahar Tohidi 3

1 Assistant Professor in Economics, Department of Economics, Institute for Humanities and Cultural Studies, Tehran, Iran

2 Assistant Professor in Economics, Department of Economics, Yazd University, Yazd, Iran

3 M.A. in Economics, Department of Economics, Tarbiat Modares University, Tehran, Iran

https://doi.org/10.22054/ijer.2021.54008.892
Abstract
In recent decades, the effect of financial development on real sector growth has been discussed from different aspects. This paper focuses on financial structure and explains the role of bank-based and market-based financial structures on economic growth by classifying the literature. Using the FMOLS method for the period 1979-2016, the effects of financial structure and banking structure on per capita GDP and sectors’ growth (agriculture, industry, and services) in Iran are estimated. Empirical findings indicate that discriminating policies and bias in financial structure in favor of a specific sector has a negative effect on real sector growth, especially agriculture and industry. Therefore, in support of the design of a balanced financial structure, it is recommended that the state should avoid any intervention or discrimination in favor of a specific sector. In the case of banking structure, the findings show that increasing the financial strength of banks encourages economic growth.

Keywords

Financial Development
Financial Structure
Bank
Stock Market
Economic Growth
Subjects
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  • Receive Date 23 July 2020
  • Revise Date 09 December 2020
  • Accept Date 18 November 2020
  • First Publish Date 24 January 2021

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