The effect of globalization and inflation on the development of Islamic finance in Iran

Financial development is very important as a complement to the real part of the economy. Because, efficient financial systems can gather information about investment opportunities, consolidate and mobilize savings, monitor investments and apply corporate governance, facilitate the exchange of goods and services, and distribute and manage risk, by reducing exchange and acquisition costs. information to enable better allocation of resources. In this research, the effects of globalization (economic dimension, social dimension and political dimension) and inflation on the index of financial development (facilities granted by the banking system) in Iran during the period of 1368 to 1400 It has been analyzed by EViews and OxMetrics software.

Markov switching econometric technique is used in this study.

Financial development with an interruption period has a positive and significant effect on financial development in the model. The width from the origin in the model has a negative and significant effect at the level of 90% in the first regime, and in the boom regime, the globalization index has a positive effect on financial development.

The estimation results indicate that inflation in both regimes had a negative effect on financial development. Regarding the globalization index, we saw a positive relationship in the first regime and a negative relationship in the second regime.Keywords: Globalization, Inflation, Financial Development, Markov Switching.