The effects of the financial and trade opening on financial development of Iran Along with a selection of Islamic countries

The efficient financial markets are considered as the important mechanisms in economic sphere, so that most of the economists believe that the financial development and then the economic development cannot be achieved without an efficient financial sector. Therefore, this study aims at investigating the effect of financial liberalization and financial and trade openness on financial development of Iran and some Islamic countries during 2000 to 2014. In this regard, the econometric model of financial development is specified according to Baltagi et al (2007) and the data of per capita income, trade openness, financial openness, domestic credit by private and banking sectors, and GDP is utilized to estimate it. A set of panel data is created and the dynamic panel technique is used based on generalized method of moments (GMM) in this research. On this basis, the experimental results of research indicate that the trade openness is significant and affects financial development. It is found for impact of financial openness that the higher domestic credit (DC) of private and banking sectors will significantly improve the financial development.

Keywords:

Financial development , financial openness , trade openness , financial liberalization , panel data