The Effect of Specialized Banks on Value Added of Iran Economy Sectors (FMOLS Co-Integrating Approach)

The main purpose of this study is to investigate the effect of government credit intervention in the banking system on the growth of Iran economic sectors during the years 1997-2017. For this purpose, using the fully modified least squares model (FMOLS), the long-run relationship in development banks (Bank of Industry and Mines, Agriculture and Housing) was estimated. The results of model estimation show that the variables of net capital stock of economic sectors and facilities of development banks to economic sectors, labor force of economic sectors and the share of each development bank in the total banking system, the degree of openness of the economy and the state ownership index of banks has a positive and significant effect on the value added of economic sectors. Therefore, the most important result of the present study has been that government credit intervention through development banks (industry and mining, agriculture and housing), has a significant effect on the economic growth of relevant sectors (industry, agriculture and construction). Therefore, in this study, developmental view on the presence of the government in the financial sector, especially banks, is accepted and supported. However, According to the research results (significance at 90% level) it seems that the state nature of banks and their non-share in the profits and losses of enterprises, especially in times of recession, has caused a weak effect of this type of ownership on the value added of economic sectors.