Specialized Banks and the Growth of Related Economic Sectors in Iran: Investigation of the convergence hypothesis

In this study, the effect of government credit intervention in the banking system on the growth of economic sectors and its convergence in the Iran economy during the period 1998-2018 was investigated. For this purpose, the ARDL Panel model and the beta convergence function were used. The results showed that government credit intervention in the banking system (through the variables of payment facilities of specialized banks to their respective sector,the share of each specialized bank in the total banking system and state ownership of banks) had a significant effect on economic growth and value-added convergence.Findings of the beta convergence function estimate showed that the beta convergence coefficient without considering the effect of government credit intervention was -0.31 and considering it was -0.67,which indicates the value-added beta convergence between economic sectors.Convergence rate has also increased from 0.017in the case without government credit intervention to0.052in the case of government credit intervention.The specialization of banks with the aim of economic growth in various sectors can lead to the creation and increase of convergence rate in Iran's economy sectors.Therefore,it was suggested that the facilities granted to the economic sectors be proportional to their share of GDP,employment and especially the total productivity of production factors.