Social Capital and Financial Development in Iran

The purpose of this paper is to study the impact of social capital on financial development in Iran. To do so, the statistical data were collected during 1984 to 2012 and vector error correction model was used. The number of annually judicial cases about returned checks and liquidity to real gross domestic product ratio were selected as proxies of social capital and financial development respectively. The results derived from Johansen cointegration test indicate that there is a long-run equilibrium relation between social capital and financial development in Iran. Also vector error correction model estimates show that social capital has a positively significant impact on financial development in Iran.