The Effects of Financial Liberalization on Productivity Index: Evidence from the Manufacturing Sector Using the Mixed Data Sampling (MIDAS) Model with an Emphasis on Trade Liberalization
Keywords:
Financial liberalization, Productivity index, Manufacturing sector, Midas model, Trade liberalizationAbstract
This study aims to examine the effects of financial liberalization on the total factor productivity (TFP) index in Iran’s manufacturing sector using the Mixed Data Sampling (MIDAS) model, with a specific focus on trade liberalization. The research is applied in purpose and descriptive–analytical in nature. Post-event statistical data were collected from the World Bank and Central Bank of Iran for the period 1991–2023. Data were analyzed using EViews software and the MIDAS model. The dependent variable was total factor productivity (TFP), and the independent variables included stock price index, foreign direct investment (FDI), financial depth, trade liberalization, oil price, exchange rate, and interest rate. Results revealed that the stock price index, as an indicator of financial liberalization, had a positive and significant effect on TFP at the 95% confidence level. Foreign direct investment (coefficient = 0.89, p = 0.0033) and financial depth (coefficient = 0.11, p = 0.000) also had positive and significant impacts on productivity. In contrast, the exchange rate and interest rate had negative and significant effects on productivity, while oil prices were statistically insignificant. The model’s R-squared value of 0.92 indicated a strong explanatory power. Financial liberalization enhances productivity by facilitating access to financial resources, promoting competition in financial markets, and attracting foreign investments. However, effective implementation requires macroeconomic stability and robust financial supervision mechanisms to mitigate potential risks.
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Copyright (c) 2025 Seyed Hamed Mousavian (Author); Marjan Damenkashideh (Corresponding author); Majid Afsharirad (Author)
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