The Effects of Financial Intermediaries on Iran's Economic Growth

The issue of relationship between financial sector development and economic growth has been the core of discussion among growth and development Economists. Due to various results till now, no common ground is achieved. The empirical researchers in Iran also had different results. It is necessary to mention that, the majority of the studies here in Iran were based on aspects of exogenous growth models. In this respect, no specific and comprehensive study is yet made. In this paper we try to determine the role financial intermediaries on endogenous growth of Iran’s Economy. For this purpose, the endogenous growth model is considered. These models are comprised of households, firms, and financial sector. We use VECM analysis and Johansson's methods. Results of the estimated model show a negative and trivial relation between financial intermediaries and Economic growth in Iran, in such a way a high correlation between financial intermediaries and Economic growth can not be concluded.