چکیده:
This paper examines the effect of factors on the development of commercial banking in Iraq. Seven factors used as determinates for financial depth which are per capita GDP, inflation rate, government budget deficit, share of state-owned banks of total assets as proxy of financial repression, oil sector domination, international trade openness and political stability as explanatory variables against the banking development as endogenous variable. By using VAR model, empirically the paper found that the per capita real GDP, the degree of openness and share of state-owned banks of total assets are the variables stimulated the financial depth in Iraq during 1980 and 2010. However other variables did not register any influence for financial development in Iraq. In addition, the paper found unidirectional relationship between financial development and economic growth run from real sector to financial sector.
Keywords: Financial
خلاصه ماشینی:
Seven factors used as determinates for financial depth which are per capita GDP, inflation rate, government budget deficit, share of state-owned banks of total assets as proxy of financial repression, oil sector domination, international trade openness and political stability as explanatory variables against the banking development as endogenous variable.
By using VAR model, empirically the paper found that the per capita real GDP, the degree of openness and share of state-owned banks of total assets are the variables stimulated the financial depth in Iraq during 1980 and 2010.
In addition, the paper found unidirectional relationship between financial development and economic growth run from real sector tofinancial sector.
The selected factors are per capita GDP, inflation rate, government budget deficit, government ownership of banks as proxy of financial repression, oil sector domination, international trade openness and political stability.
- Problem of the Paper A developed banking system is strongly needed to finance and spurring economic growth in Iraq.
However, Robinson introduced different idea when she stated that financial development follows economic growth, and articulated this causality argument by suggesting that “where enterprise leads finance follows” (1952: 88).
Boulila and Trabelsi (2004) examined the nexus between economic growth and financial development for the Middle East and North African (MENA) countries.
More specifically, recent theories emphasize the importance of information asymmetries in credit markets and demonstrate how increases in the rate of inflation adversely affect credit market frictions with negative consequences for financial sector (both banks and equity markets) performance and therefore long-run real activity (Huybens and Smith, 1999).