The Study of Financial Repression Effects on Investment & the Growth model of Agricultural & Industry Sections of Iran Focusing on Deposit Rate by Threshold Panel Data GMM Approach

Financial repressions, including profit-rate determination for both loan and deposits, high reserves requirement rate, and credit rationing have been imposed in Iran by financial sector for a couple of decades. Following Fry and Narayans models, this article studies the impacts of the repressions on investment and growth of agricultural and industrial sectors using a General Method of Moment (GMM) threshold level model. The findings are that the implementation of these models does not reject the McKinnon-Show hypothesis. However, there are significant differences between before and after threshold level growth and investment in both sectors. Furthermore, the results indicate that among the proxy variables, profit rate has more negative effect on growth and investment of these sectors. The study suggests that the policy-makers should avoid of financial repression after threshold level.