The Review of Relationship between Financial Development and Economic Growth with Introducing New Variables

The main purpose of this study is to investigate the relationship between financial development and economic growth, by using new variables such as domestic credit provided by banking sector, domestic credit to the private sector, broadest definition of money, gross domestic saving and also government expenditure and trade. The 2 latest variables represent real sector of economy, and inflation, during1967-2007. The estimate of long run relationships between variables shows negative relationship between growth and financial development. However, short run relationship between growth and financial development have been done by Granger causality block erogeneity test that findings show domestic credit provided by banking sector doesn’t entails causality Granger of growth. Finally, the relationship between growth and domestic credit to the private sector is the two way causality.