The impact of financial market on industry growth: an evidence from Russia and Iran

Sergeeva I.G. and Tayebehsadat T.
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Sergeeva I.G.: Saint-Petersburg National Research University of Information Technologies, Mechanics and Optics
Tayebehsadat T.: Saint-Petersburg National Research University of Information Technologies, Mechanics and Optics

Вестник Пермского университета. Серия: Экономика, 2016, issue 4 (31), 66-73

Abstract: The relationship between financial markets and industry growth has been approved by many previous studies. In this paper, as an innovative research, we try to find the impact of market capitalization in financial market as a proxy for financial market on the industry growth in Russia and Iran. In fact, these two countries are classified as developing economies in which the financial markets can play a powerful engine to improve the industries’ performances. Hence, it would be interesting to compare market capitalization-industry growth nexus in Russia and Iran as two developing countries. In order to fulfill this purpose, an econometric model called Vector Autoregressive Model (VAR) is applied for the annual data over the period of 1992-2014. The finding proves the positive relationship between market capitalization and industry growth in both countries, Iran and Russia. Based on the results, a 1% increase in market capitalization in Iran and Russia increases the industry growth by 0.07% and 0.02%, respectively. It has been concluded that market capitalization can play a significant role in order to grow the industry in Iran and Russia. However, these two countries need to improve the efficiency of their financial markets to improve the positive impact of these markets on their industrial growth. The novelty of this research can be highlighted in this way that the financial market in oil exporting countries, Russia and Iran as our case studies, may be a golden key to reach to a positive and stable economic growth. Thereby, oil exporting countries should try to implement good financial policies and improve the efficiency of financial market.

Keywords: MARKET CAPITALIZATION; IRAN; RUSSIA; INDUSTRY GROWTH; TIME SERIES ANALYSIS; ECONOMIC MODELING; VECTOR AUTO REGRESSIVE MODEL; UNIT ROOT TEST; LAG SELECTION; CO-INTEGRATION TEST; РЫНОЧНАЯ КАПИТАЛИЗАЦИЯ; ФИНАНСОВЫЙ РЫНОК; РОСТ ПРОМЫШЛЕННОСТИ; ЭФФЕКТИВНОСТЬ ФИНАНСОВОГО РЫНКА; АНАЛИЗ ВРЕМЕННЫХ РЯДОВ; ЭКОНОМИЧЕСКОЕ МОДЕЛИРОВАНИЕ; МОДЕЛЬ ВЕКТОРНОЙ АВТОРЕГРЕССИИ; ТЕСТ НА ЕДИНИЧНЫЕ КОРНИ; ВЫБОР ЗАДЕРЖКИ; КОИНТЕГРАЦИОННЫЙ АНАЛИЗ (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:scn:006506:16967140

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