Analyzing the impact of financial repression policies and financial depth on macroeconomic variables in Iran: Simultaneous equations approach

One of the challenges facing economic sectors is providing the required financing and liquidity for fixed investments and current capital (working capital). The current study is aimed to expand such studies in another aspect of the role of financial markets in terms of their relationship with macroeconomic variables such as economic growth rate, unemployment rate, and exchange rate as vital economic variables. Considering the position of the financial system in the allocation and efficiency of financial resources, this study deals with the impact and importance of financial repression policies and financial depth in solving the problems of the unemployment rate, exchange rate, and economic growth rate in Iran with the simultaneous equations approach from ۱۹۷۱ to ۲۰۱۷. The results showed that financial repression and depth policies significantly affect macroeconomic variables (economic growth, unemployment rate, and exchange rate). Furthermore, it is indicated that the financial repression policy does not have a negative effect on economic growth and a positive effect on the unemployment rate; however, it has a positive impact on the exchange rate. In addition, this study unravels that the financial depth policy does not negatively and significantly affect economic growth. However, it positively affects the exchange rate and unemployment rate.

Keywords:

Financial repression , Financial depth , Macro variables , Iran’s Economy