The Effect of Government Size and Trade Openness on Banking Crisis in Iran: Based on the Method of Jing et al. (2013)

Since the Industrial Revolution, capitalism has undergone numerous financial, economic and banking crises. Financial, economic, and banking crises are fundamentally apprehensive and there is a need to review, analyze and develop appropriate policies for prevention and management of crises. In this research, in addition to measuring the financial crisis index based on the method proposed by Jing et al. (2013), the Logit econometric model was used to estimate the model. we investigate the effect of size of government and commercial openness on the banking crisis in Iran during the period of 1350 to 1396. The results show that government size has a positive and significant effect on the banking crisis. In fact, increasing the size of the government will lead to an increase in the banking crisis. For this reason, the role of the government in the economy should be reduced, or at least the government intervenes in the necessary cases of economics, because reducing the size of the state in the economy will increase investment and economic growth. The degree of trade openness has had a negative and significant impact on the banking crisis, and in fact, the degree of openness of the business has reduced the banking crisis. Given these results, it is suggested that Iran, in pursuit of accession to the World Trade Organization, pursue a policy of commercial openness, including a gradual reduction of imported tariffs at a higher pace, in order to create more employment opportunities.