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Abstract

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.

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