Relationship between Financial Development and Exports: The Case of Fars Province

The main goal of this research is to investigate the causal relationship between financial development and export growth in Fars province. To this end four different indices including private deposit ratio، banking credit to private sector، credit balance ratio and M2 to GDP ratio were to estimate financial development. The results of the estimation showed that there is unidirectional causality form export growth to financial development. As a result، the findings support the demand following hypothesis for Fars and reject the supply leading theory advocated by Patrick (1966). This indicates that the expansion of exports leads to financial development. This might be due to the demand of exporting firms for financing their imports of raw materials، primary and capital goods، new technology and also for receiving financial supports against foreign uncertainties and domestic shocks.