Shiraz University Iranian Journal of Economic Studies 2322-1402 13 2 2025 02 19 Analyzing the Nonlinear Relationship Between Financial Development and Economic Growth in Iran: A Combined Approach Using Principal Component Analysis and Copula Models تحلیل رابطه غیرخطی بین توسعه مالی و رشد اقتصادی در ایران: رویکردی ترکیبی با استفاده از تحلیل مؤلفه‌های اصلی و مدل‌های کاپولا 455 479 8194 10.22099/ijes.2025.53398.2042 EN Saeed Kian Poor Department of Economics, Payame Noor University (PNU), Tehran, Iran. Seyed Ehsan Alavi Department of Economics, Hakim Sabzerari university, Sabzevar, Iran. Journal Article 2025 06 03 The relationship between financial development and economic growth is one of the most debated and significant topics in economic literature. This study examines the Iranian economy from 1990 to 2023 by constructing a composite financial development index, utilizing indicators such as the ratio of Credit to the private sector and broad money (M2) to gross domestic product (GDP). Principal Component Analysis (PCA) was applied to construct the composite index, and copula modeling was used to investigate the nonlinear relationships between variables. Additionally, Kendall, Spearman, and Pearson correlation coefficients were calculated to assess the strength and direction of the relationships. The results indicate no strong or statistically significant relationship between financial development and economic growth in Iran. The weak correlations and findings from the copula model suggest a lack of structural dependence between the two variables. These findings suggest that financial resources have not been effectively allocated to productive sectors, and financial development has not contributed significantly to economic growth. The results underscore the need for structural reforms, efficient resource allocation, and the strategic direction of liquidity in the economy.ns and findings from the copula model suggest a lack of structural dependence between the two variables. These findings suggest that financial resources have not been effectively allocated to productive sectors, and financial development has not contributed significantly to economic growth. The results underscore the need for structural reforms, efficient resource allocation, and the strategic direction of liquidity in the economy https://ijes.shirazu.ac.ir/article_8194_d8b8ffa30539ef7a13960b418f0a6320.pdf