The Effects of Fiscal Policieson Industrial Development in Iran

Industrialization as an engine of economic growth is one of the basic strategies for economic growth and development. In fact, industrialization is known as the shortest way to end technical and economic backwardness in the shortest possible time, which has a function to increase production productivity and work efficiency. In the process of development, the share of the agricultural sector in the GDP will gradually decrease and the share of the industry will increase. The development of the industry as one of the sectors with economy of scale is one of the most important components of economic growth, for this reason, knowing the factors affecting the growth of the industry is of great importance. The present study investigates the effect of the government's financial policies on the growth of the industrial sector using the statistical evidence of Iran for the period of 1978-2020 and the ARDL approach. The results of the estimates show that industrialization in Iran's economy is a long-term process and short-term temporary policies will not be able to increase the share of industry in the economy. According to the evidence, in the short term, only the exchange rate has a negative and significant effect on industrialization, but in the long term, the financial and support policies of the government and the exchange rate have a negative and significant effect on the growth of the industry, therefore increasing the attraction of foreign direct investment through diplomacy. Strong, creating economic stability in the financial markets and directing credits towards activities with added value and providing a comprehensive government program to improve the infrastructure are the most important policies proposed for this study.