Investigating the role of inflation in the effectiveness of financial development on economic growth in Iran مقاله

خلاصه ماشینی:

Investigating the role of inflation in the effectiveness of financial development on economic growth in Iran Received date: 2014/05/12 Acceptance date: 2014/06/13 3 Ebrahim Hedian 2 Behnam Izadi Abstract The financial sector, by mobilizing and arranging resources and allocating them to productive investments, leads to an increase in capital stock or an increase in the productivity of the entire economy and ultimately higher economic growth. The distinguishing feature of this research from other domestic studies is the determination of inflation thresholds for the Iranian economy, in which financial development (considering the selected index) has the greatest role and positive effect on economic growth. Specifically, recent theories emphasize the importance of information asymmetry in credit markets and show how an increase in the inflation rate has a positive effect on credit market frictions and negative consequences for the performance of the financial sector and, consequently, on the long-term activities of the real sector of the economy (Huybens and Smith 2, 2010, 2011). In this study, to examine the impact of financial development on economic growth, the model used in the research of Beck and Levine 9 (2004) has been utilized due to its completeness in terms of the application of key variables in economic growth models which is presented below: (Refer to the page image) where n represents financial development, C represents human capital, R represents the nominal exchange rate, G represents government expenditure, p/n represents the economic openness index, and In represents the inflation rate.