Journal of Industrial and Systems Engineering

Journal of Industrial and Systems Engineering

Investigating the relationship of financial systems with economic growth in the Middle East countries by the approach of simultaneous equations using the seemingly unrelated regression (SUR) method.

Document Type : Research Paper

Author
Azam Hajiaghajani
Department of management, Cha.C., Islamic Azad University, Chalus, Iran.
Abstract
Investigating the two-way relationship between economic growth and financial development is an important issue that can lead to a better understanding of economic dynamics. The purpose of this research is to investigate the relationship between financial development and economic growth for the Middle East countries between 2010 and 2023. This research has been carried out using the system of simultaneous equations method with the seemingly unrelated regression (SUR) approach. According to the research results, financial development does not have a significant effect on economic growth, but growth has a positive and significant effect on financial development. It can be concluded that financial development, as a key element in achieving sustainable economic growth, cannot be unilaterally influential. Although strong and efficient financial infrastructure is necessary to facilitate investment and financing, financial development alone cannot lead to economic growth. On the other hand, economic growth as a strong driving force has a positive and significant effect on financial development. When the level of production and consumption in a country increases, the demand for financial services also increases. This allows financial institutions to offer more variety in their products and services, leading to improved efficiency and financial leverage. Therefore, economic growth not only helps increase investment and innovation, but also strengthens financial structures and facilitates access to financial resources for all economic stakeholders.
Keywords
financial development
economic growth
seemingly unrelated regression (SUR)
simultaneous equations
Subjects
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  • Receive Date 25 September 2024
  • Revise Date 02 October 2024
  • Accept Date 03 October 2024