Authors
1 Faculty member of the Faculty of Economics, Allameh Tabatabai University
2 PhD student in Economics, Islamic Azad University
Abstract
Models dealing with the relation between financial Phenomena and economic growth are of Neo-Schumpeterian Growth Models. In these models, financial performance effects the sustained economic growth in two ways: the rate of capital accumulation and the affects rate of technological innovations.
In this article, we use Patrick's approach to analyze the causality relation between financial development and economic growth. For our empirical work, we use VEC model, which shows that the development of stock market and the long term financial resources have positive and long term effects on economic growth. The causality relation works unilaterally from the real sector to financial development. Furthermore, the article analyzes dynamic effects of different shocks on economic growth, and the variance decomposition of GDP growth by VEC modes
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