The effects of various banking policies on financial sector development will be practically studied in this paper. To do so، a vector auto regressive econometric model in the framework of homo cumulative model has been used. In order to study the affecting methods of each variable on financial sector development، generalized response functions has been used. The results show that inflation rate has a significant negative long term on financial (banking) sector، while per capita income has a significant and positive effect on financial development. In addition، financial development index rises because of financial freedom and the increase of per capita income while، inflation rate shock decreases financial freedom index and prevents its development.

JEL Classification: E44, E51, E52, E58, G28