Abstarct: Developed financial markets play a key role in attracting and allocating resources optimally. These markets receive money from investors and invest in economic activities with the highest returns and the lowest risk. In some countries the banking sector, in others the capital market, and in many countries both sectors are active in attracting and allocating liquidity. In Iran, the banking sector and the capital market are complementary, so the development of the capital market can help develop the financial sector and increase the efficiency of this sector. In this regard, this study examines the impact of exchange rate, inflation rate, banking sector development, capital market liquidity, trade openness and economic growth on the development of the country's capital market in the period 1385: 4 to 1399: 1 using ARDL approach . According to the results, in the short run, the effect of the exchange rate on the development of the capital market is positive. However, the effect of trade opening, economic growth and inflation is negative. The negative effect of economic growth and business opening on the development of the capital market is due to speculative incentives, which is due to the inefficiency of production due to inflation and cost pressure on enterprises. The effect of banking sector development is also negative and significant, which shows that the banking sector and the capital market are rivals in attracting liquidity and allocating it in the short run. The effect of capital market liquidity is also negative, but not significant. However, the effect of the exchange rate in the long run, as opposed to the short-term, on the development of the capital market is negative. This indicates the competitiveness of the foreign exchange market and the capital market in attracting liquidity in the country. In contrast, the effect of inflation and banking development on capital market development is positive in the long run. Thus, inflation in the long run leads to attractive investment in the stock market and makes it prosperous. In addition, given that a large part of the banks' portfolio consists of shares, the capital market will grow and develop as their absorption of liquidity increases, which is possible with the development of the banking sector. Accordingly, in the long run, the banking sector and the capital market are complementary. The convergence of the short-term to the long-term path will also be exponential.