Dissertation for receiving Master degree (M.A)
Treatment: Development Economics and Economic Planning
Summer 2012
Chapter 1
General Plan
1-1 statement of the research problem:
Financial development is a category that has received the attention of countries' economies during the last few decades. In order to achieve the desired economic growth and development, it is necessary to pay attention to the existence of efficient institutions and appropriate financial resources. An efficient financial system can provide the fastest possible growth and development of the economy through gathering and appropriate allocation of saved funds, monitoring investments and applying corporate governance, facilitating the exchange of goods and services and distribution and risk management, through obtaining information and reducing exchange costs. The purpose of supervision of capital flows is to provide domestic and foreign investors with access to better funds flows, which in turn reduces the cost of capital and more diversity in the financial portfolio (Stolz [1] 1995)
Financial development is the development of reforming institutions, among these reforms can be recognition of property rights, legal system, corruption, etc. He pointed out that these institutions themselves are controlled by tools such as commercial liberalization (by reducing tariffs, corruption, etc.) and financial liberalization (facilitating the use of foreign direct investment, etc.).
Since one of the important functions of financial institutions is monitoring and controlling investment projects, the weakness of the functions of financial institutions causes Limited investment has been made and mostly investments with higher returns are replaced by projects with lower returns and thus reduce the financial development (Neili 2019). Therefore, investigating the factors affecting financial development is of particular importance.
This research deals with the effect of financial and commercial liberalization as an important factor in persuading selected OPEC member countries to carry out institutional reforms effective in promoting financial development and economic growth. Advanced countries can help the process of institutional reforms by supporting and opening their markets to the goods and services of countries with emerging markets. Also, by encouraging these countries to increase their participation in global markets, provide the necessary incentives for the selected OPEC member countries in order to carry out effective reforms in order for these countries to achieve high economic growth.
This research examines the effects of commercial and financial liberalization in the financial development process of the selected OPEC member countries with an emphasis on Iran. Will they provide OPEC?
1-2 research objectives:
a) Examining the influencing factors on financial development.
b) Examining the influence channels of financial liberalization on financial development.
C) Examining the influence channels of trade liberalization on financial development.
1-3 The importance of the research topic and the motivation for choosing it:
It is said that hard work is the cause of the growth and development of countries, but we see countries whose workers work for long hours with low wages, but their countries still remain poor. So we see that hard work alone is not the cause of getting rich and then economic growth and development. There are institutional reforms that provide financial development and growth. Among the necessary conditions for the reform of the institutions, we can mention the financial and commercial liberalization, so that by reducing the tariffs and in line with that, reducing corruption and increasing competition in the global markets and facilitating the use of foreign capital, we can provide the growth and financial development of countries. Therefore, in this research, the effect of financial and commercial liberalization indicators on financial development is investigated. 1-4 research questions or hypotheses: (explaining the relationships between the studied variables) 1-4-1 The hypotheses of this research are as follows: a) commercial liberalization has a positive effect on the financial development process in countries selected member of OPEC has a positive effect on financial development in selected member countries of OPEC.
B) Financial liberalization has a positive effect on the financial development process in selected OPEC member countries.
1-4-2 questions of this research are as follows:
A) Does the ratio of total exports and imports to GDP have a positive effect on the ratio of credits given to the private sector to GDP?
B) Does the ratio of net foreign direct investment to GDP have a positive effect on the ratio of credits What is the effect given to the private sector to the GDP?
1-5 research model:
In this research, the article of Baltaji et al. [2] (2008) is used to investigate the relationship between financial and commercial liberalization on financial development. For this purpose, the desired model is defined as follows:
LNFDit=α+β1LNFOit+β2LNTOit+β3LNYit+β4LNinsit+Uit
The variables used in the model are as follows:
LNFD: is the logarithm of financial development (dependent variable) which is given for this variable from the credit ratio index private sector is used to GDP.
LNFO: is the logarithm of financial liberalization, which is used for this variable from the index of government ownership and control in the banking and insurance sector and the degree of freedom of financial institutions in determining how to provide credit based on a percentage of GDP.
LNTO: is the logarithm of trade liberalization, which is used for this variable from the index of the amount of tariff and non-tariff restrictions A tariff on the import of foreign goods has been used as a percentage of the GDP. LNY: the logarithm of per capita income at constant US 2000 prices. LNINS: the logarithm of the institutional index, which is the index of corruption, government stability and quality of bureaucracy as a percentage of the GDP. (FD, Y) is taken from the site (WDI), indices (FO,TO) are taken from the site (HERITAGE), and index (INS) is taken from the site (ICRG).
In this research, the factors affecting financial development with an emphasis on globalization (financial and commercial) for a group of OPEC member countries with an emphasis on Iran for the years (2000-2011) with the technique The econometrics of panel data (POOLED) is examined.
1-6 operational definitions of variables and key words:
Financial liberalization: it means better access and at a lower cost to foreign direct investment and foreign financial aid from countries.
Trade liberalization: it means removing tariff barriers. And as a result, reducing corruption and opening the goods market to foreign products. Financial development: Financial development is actually the development of financial markets (in the money and capital market), one of the most important tasks of which is channeling and better allocation of funds. It will be done using reliable scientific sources. Appropriate econometric methods will be used to test the research hypotheses. Due to the fact that it is multi-country, it is in the form of a panel data technique that examines financial and trade liberalization on the financial development of a group of OPEC member countries with an emphasis on Iran. 1-8 scope of research: Financial development is actually the reform of institutions that can lead to economic growth and development. Among the components of institutional reforms, the following can be mentioned: a) property rights, b) legal system, c) corruption, d) quality of financial information, e) corporate governance, j) regulations and complete and prudent supervision of the banking system. Now that we have identified the necessary institutions to promote financial development and economic growth, we must also identify the tools that stimulate institutional development. One of the most important tools is the liberalization of financial markets and trade liberalization, each of which affects institutional development and, in line with it, financial and economic development in different ways. Financial liberalization provides financial development in various ways: a) Opening financial markets to foreign capital directly increases access to capital. b) Opening financial markets reduces access costs for people inclined to invest in productive activities and.