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.

Recommended Citation

Taghipour, Anoshirvan (2009) "Financial Restraint and Financial Development in Iran: The Conditional Co-Integration Approach," Review of Middle East Economics and Finance: Vol. 5 : No. 2, Article 5.
DOI: 10.2202/1475-3693.1200
Available at: http://www.bepress.com/rmeef/vol5/iss2/art5