DOI: https://doi.org/10.32461/2226-3209.1.2018.178685

THE EFFECT OF FINANCIAL LIBERALIZATION ON IRAN'S ECONOMIC GROWTH

Khalil Saeedi, Saeedi Moghadamfar

Abstract


Abstract. In general, financial liberalization refers to any decision made by government of a country, in which the capital flows freely inside or outside the country, leading to increased domestic investment and economic growth. In this research, the relationship between financial liberalization and economic growth in Iran during the period of 1991-2012 was examined using vector auto-regression model (VAR). The KAOPEN financial liberalization index, inflation rate, and foreign direct investment were used as explanatory variables and economic growth was used as a dependent variable in the model of this study. The research results suggest a negative relationship between the economic growth variable and the variables of financial liberalization index (KAOPEN) and inflation. There is also a positive relationship between economic
growth and foreign direct investment.
Keywords: financial liberalization, economic growth, vector auto-regression model.


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