Investigating the relationship between capital market development and economic growth

The capital market is affected by various factors. These factors are classified into two categories: internal factors and external factors. Among the internal factors, profitability and profit sharing policies of the company, the amount of company risk, the performance of managers, etc. External factors are beyond the control of the company and are among the most important external factors of economic variables that affect the recession and prosperity of the stock market. The main purpose of this study is to investigate the relationship between capital market development and economic growth in Iran. The required data have been reviewed and tested quarterly during the period 1382 to 1391. In the present study, Dickey- Fuller unit root tests were used to evaluate the reliability of variables, Johansen-Josilius co- integration tests and Granger causality test. The results indicate that due to the lack of development of the Tehran Stock Exchange, the effect of capital market development on economic growth is very small and also according to the tests performed, the effect of economic growth on capital market development is small and insignificant.