Financial Restraint and Financial Development in Iran: The Conditional Co-Integration Approach

Taghipour Anoshirvan
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Taghipour Anoshirvan: The Economic Planning Department of Vice-Presidency for Strategic Planning and Control, Iran and University of Tehran

Review of Middle East Economics and Finance, 2009, vol. 5, issue 2, 88-106

Abstract: This paper aims to investigate empirically the effect of financial restraints on financial development in Iran over the period 1960-2005 by using the conditional co-integration method. In doing so, different hypotheses in terms of financial restraints and financial development in the context of the McKinnon/Shaw model and the monopoly bank model are addressed. The main results show that financial restraints had a negative effect on financial development. The finding indicates that monetary authorities in Iran used a severe financial repression policy because a mild repressive policy in a monopoly banking structure which is the case in Iran could have increased financial intermediation.

Keywords: financial restraint; financial development; conditional co-integration (search for similar items in EconPapers)
Date: 2009
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DOI: 10.2202/1475-3693.1200

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