This paper investigates the long run relationship between financial development and economic growth since 1340 to 1385. Firstly, we study diverse instruments of Iranian financial system. Then, we define 8 indices extracted from banking system to represent indicator of financial development. Furthermore, we transform the indexes of financial development into a unique and comprehensive index by using factor analysis method. We estimate relationship between these variables an assess causality relationship by means of Granger Causality Test. Our findings show: (a) there is a direct relationship between financial development and economic growth in Iran and (b) the direction of causality is from economic growth to financial development.
Fotros M H, Najarzadeh A, Mahmoodi H. The Relationship Between Financial Development and Economic Growth In Iran: Using Factor Analysis Method. qjerp 2011; 18 (56) :73-64 URL: http://qjerp.ir/article-1-224-en.html