Effects of Financial Markets on Iran's Industrial Growth

The main feature of in Iran's financial markets is the higher role of government and non-competetiveness condition. The establishment of suitable financial services to stimulate industrial growth is one of the most important problem in Iran. The main hypothesis of this paper is to test the relation between financial development and financial repression on industrial growth in Iran during 1974-2007 (Iranian calendar 1353-1386). Based on the ARDL and ECM models, the findings show that the financial development has positive and significant effect on industrial production per capita. On this basis, the deepening of financial intermediary and omission of financial constraints can enhance industrial growth in Iran. In other hands, financial repression has caused a negative effect on industrial production which necessitates to take a decisions to improve the competitive conditions in financial markets. In addition, such findings indicate the importance of Macro financial variables in industrial growth rate.