The Short and Long Run Causality between Financial Development ‎and Economic Growth in Iranian Provinces

Document Type : Research Paper

Authors

Assistant Professor, Department of Economics, School of Economy, Management ‎and Social Sciences, Shiraz University

Abstract

The relationship between economic growth and developments in the ‎financial sector has been one of the most discussed areas in economics ‎for a long time; and the direction of causality – whether financial ‎development causes economic growth or vice versa – is by no means a ‎settled issue.‎
This paper investigates the short- run and long-run Granger causality ‎between financial development and economic growth in Iranian ‎Provinces during the period 1991–2011. ‎
More specifically, in the first stage, we use a Fully Modified Ordinary ‎Least Squares (FMOLS) method to estimate our long-run panel data ‎model. In the next stage, Generalized Method of Moments (GMM) is ‎used to examine Granger Causal relationship between each pair of ‎variables. The results suggest the existence of bidirectional short-run ‎and long-run Granger causality between financial development and ‎economic growth

Keywords

References

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History

  • Receive Date: 31 January 2015
  • Revise Date: 23 January 2016
  • Accept Date: 13 February 2017

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