Financial deepening and economic growth in Gulf Cooperation Council countries

The aim of this paper is to investigate the causal relationship between financial development and economic growth in GCC countries for the period 1980-2010. To this end we use a multivariate vector autoregressive (VAR) framework by including investment as an additional variable to the finance and growth nexus. Our empirical analysis is based on a modified version of the Granger non-causality test by applying the Toda and Yamamoto procedure. The overall empirical results reveal that financial development contributes significantly to economic growth in the GCC context. Our results could be of great interest for policymakers since the financial sector could play a crucial role in lowering the dependence of the governments to oil revenues and could contribute significantly to spur economic growth

Financial development and economic growth in Malaysia: Cointegration and Co-feature analysis

This study seeks to explore the relationship between financial development and economic growth in Malaysia over the period of 1980 to 2008 using the Kuala Lumpur Composite Index (KLCI) and the Index of Industrial Production (IIP). Focusing on long term relationship, this investigation is carried out within the Granger causality and vector error correction model (VECM). The empirical results data suggest the existence of the long-run equilibrium relationship between financial development and economic growth in Malaysia. The causality between economic growth and stock market was found to mutually causal, that is the causality is bi-directional. This finding suggests that a strong stock market is a good channel to foster economic growth of the country. At the same time, strong growth of economy helps to promote the development of the stock market in Malaysia. Therefore it is vital for the Malaysian government to formulate policy that will enhance the efficiency of the financial system to stimulate the stock market and further boost up the growth of economy.stock market, economic growth, Malaysia, causality, VECM

Nexo TIC-finanzas-crecimiento: hallazgos empíricos de los países de los Próximos 11

This study assesses the causal relationship between information and communication technology (ICT) penetration, financial development, and economic growth in Next-11 countries between 1961 and 2012. A panel vector auto-regressive (VAR) model is used to detect the direction of causality between ICT, financial sector development and economic growth for these countries. The results reveal that there is Granger-causality among the variables both in the short run and in the long run, although the exact nature of the results varies by the ICT penetration indicators for the sample countries. Empirical results from this study provide valuable insights on policies pertaining to ICT penetration, financial sector development and economic growthEl presente estudio evalúa la relación causal entre la penetración de las tecnologías de la información y comunicación (TIC), el desarrollo financiero y el crecimiento económico en los Próximos 11 entre 1961 y 2012. Se utilizó un modelo de panel de vectores autorregresivos países para detectar la dirección de causalidad entre las TIC, el desarrollo del sector financiero y el crecimiento económico para estos países. Los resultados revelan que existe una causalidad de Granger entre las variables tanto a corto como a medio plazo, si bien la naturaleza exacta de los hallazgos varía conforme a los indicadores de penetración de las TIC para los países dela muestra. Los resultados empíricos de este estudio suponen una valiosa perspectiva a cerca de las políticas de penetración de las TIC, el desarrollo del sector financiero y el crecimiento económic

The End of Import-Led Growth? North Korean Evidence

In this paper, we investigate causal relationships among exports, imports, and economic growth in North Korea by using time series data for the period between 1964 and 2004. The empirical results show that there was Granger causality from imports to GNP in the first half of the period. However, there was a causal relationship from GNP to imports in the second half of the period. This implies that economic growth stimulates imports in North Korea. The North Korean economy escaped its import-led growth situation, which some socialist economies had experienced.North Korea, import-led growth, export-led growth, causality test.

Finance and growth in a small open emerging market

This study contributes to the debate on financial development and economic growth in Malaysia using quarterly observations for a sample period from 1980 to 2002. It utilises a battery of financial indicators. Based on multivariate framework which takes real interest rate and capital stock into account, the findings are suggestive that finance does play a crucial role in promoting economic growth. Policymakers should, therefore, focus their attention on the creation and promotion of modern financial institutions including banks, non-banks, and stock markets in delivering both short- and long-run economic benefits.financial development; economic growth; Malaysia

STOCK MARKET DEVELOPMENT AND ECONOMIC GROWTH: THE CAUSAL LINKAGE

This paper addresses the question: does stock market development cause growth? It examines the causal linkage between stock market development, financial development and economic growth. The argument is that any inference that financial liberalisation causes savings or investment or growth, or that financial intermediation causes growth, drawn from bivariate causality tests may be invalid, as invalid causality inferences can result from omitting an important variable. The empirical part of this study exploits techniques recently developed by Toda and Yamamoto (1995) to test for causality in VARs, and emphasises the possibility of omitted variable bias. The evidence obtained from a sample of seven countries suggests that a well-developed stock market can foster economic growth in the long run. It also provides support to theories according to which well-functioning stock markets can promote economic development by fuelling the engine of growth through faster capital accumulation, and by tuning it through better resource allocation.Financial Development, Economic Growth, Stock Market, Causality Testing, VARs, Incomplete Systems

The Causal Relationship between Institutions and Economic Growth: An Empirical Investigation for Pakistan Economy

This paper investigates relationship between institutional quality and economic performance in Pakistan using the Johansen-Juselius cointegration technique and the Granger causality test. The study results indicate that Institutions and growth are cointegrated and thus exhibit a reliable long run relationship. The Granger causality test findings indicate that the causality between Institutions and growth is uni-directional. However, there is no short run causality from Institutions to growth and vice versa. Therefore, as a policy implication that institutional quality may cause to the sustainable increase in country’s income in the long run, and success of any policy could be influenced by the soundness of institutions.institutions; social capital; growth; cointegration; index;granger; error correction; Johansen; pakistan

Financial Developent and Economic Growth Nexus: Time Series Evidence from Middle Eastern and North African Countries

This paper examines the causal relationship between financial development and economic growth in five Middle Eastern and North African (MENA) countries for different periods ranging from 1960 to 2004, within a trivariate vector autoregressive (VAR) framework. We employ four different measures of financial development and apply Granger causality tests using the cointegration and vector error-correction (VEC) methodology. Our empirical results show weak support for a long-run relationship between financial development and economic growth, and for the hypothesis that finance leads growth. In cases where cointegration was detected, Granger causality was either bidirectional or it ran from output to financial development.Financial development; Economic growth; MENA; Granger causality; Error-correction models; Cointegration

Financial Developent and Economic Growth Nexus: Time Series Evidence from Middle Eastern and North African Countries

This paper examines the causal relationship between financial development and economic growth in five Middle Eastern and North African (MENA) countries for different periods ranging from 1960 to 2004, within a trivariate vector autoregressive (VAR) framework. We employ four different measures of financial development and apply Granger causality tests using the cointegration and vector error-correction (VEC) methodology. Our empirical results show weak support for a long-run relationship between financial development and economic growth, and for the hypothesis that finance leads growth. In cases where cointegration was detected, Granger causality was either bidirectional or it ran from output to financial development.Financial development, Economic growth, MENA, Granger causality, Error-correction models, Cointegration

A SURVEY OF RECENT DEVELOPMENTS IN THE LITERATURE OF FINANCE AND GROWTH

This paper provides a survey of the recent progress in the literature of financial development and economic growth. The survey highlights that most empirical studies focus on either testing the role of financial development in stimulating economic growth or examining the direction of causality between these two variables. Although the positive role of finance on growth has become a stylized fact, there are some methodological reservations about the results from these empirical studies. Several key issues unresolved in the literature are highlighted. The paper also points to several directions for future research.Financial development; financial liberalization; economic growth.