Investigating the Effects of Financial Repression on Private Investment in Agriculture Sector
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One of the present phenomena that virtually explain weaknesses
in financial systems of different countries is financial
repression. Financial repression encompasses the different interferences
of governments in financial markets through determining
the ceiling interest on bank deposits, high rates of legal reserves,
and the government’s interference in distribution of bank
credits,which prevents the efficient performance of financial
market for better allocating resources and funds. On the other
hand, investment in agricultural sector enjoys a significant importance
due to the growth of production and employment in this
sector and rooting for the same notions in other economic sectors.
Regarding the fact that the subject matter of the current paper is
of utmost importance, it tries to investigate the impacts of
financial repression on investments in agricultural sector. In
order to realize this objective, measures such as the size of the
government in economy, the measure for financial intermediation
of banks, and the ratio of savings to GDP (Gross Domestic
Product) were utilized as the factors for financial repression. The
regression results of ARDL showed that the effects from the
measures of government size in economy and financial intermediation
of banks had a negative and significant impact on private
investment in agricultural sector. This means that the bigger the
size of government in economy the less the willingness of the
private sector for investing in agriculture. Moreover, regarding
the fact that the majority of banks in Iran are governmental, the
measure for financial intermediation of banks had a negative and
significant impact on private investment of agricultural sector.