We estimate the common, country, and idiosyncratic factors that drive the dynamics and comovement of financial development and economic growth across 89 countries in three different income groups, namely industrial countries inds, emerging market economies emes, and other. Financial systems play a crucial role in the economic development of a country. An examination of causation and efficiency a thesis submitted for the degree of doctor of philosophy by roseline oluitan department of economics and finance, brunel university, west london, uk. This paper provides a snapshot of the evolution of indian financial system along with its progress and performance by making use of various proxy. The empirical analysis on chinese financial developments influence on economic growth the masters paper. Philip arestis and panicos demetriades economic journal, 1997, vol.
Section 3 describes the methodology used to assess this nexus. G00, g10, o40, o41 1 introduction finance a ects the real economy in several ways, hence understanding the mechanisms through which it im. Evidence from a panel of 16 african and nonafrican lowincome countries. In the theoretical part of the paper, by developing a solowswan growth model augmented with financial markets in the tradition of wu, hou, and cheng 2010, we show that debt from credit markets and equity from stock markets are two long run. Financial depth, breadth, and access in developing asia 11 c. The granger causality test confirmed that financial development granger causes economic growth in india between time span of 1990 91 to 2010 11. Evidence from a randomized experiment among lowincome clients of branchless banking in india calderone et al. Moreover the change of financial market has also been brought some innovations and new policies. An empirical analysis of stock market development and.
Financial development and economic growth in the mena. The authors explore the relationship between financial structure the degree to which a financial system is market or bankbased and economic development. Bank branch presence and access to credit in low to moderateincome neighborhoods, journal of money, credit and banking, blackwell publishing, vol. The paper, therefore, cautions against financial liberalization in ghana. Financial development and economic growth in underdeveloped. Financial liberalization, financial development and economic. Financial sector development and economic growth in india. Luintel 2001, financial development and economic growth. Goldsmith 1969 was the first to document a positive. Financial development indicators are used to assess the growth of financial institutions. After considering the time series characteristics of the dataset, a multivariate vector autoregressive var framework is used as an appropriate specification and the longrun relationship among financial development, growth and other key. Assessing the contribution of islamic finance to economic. This article examines whether financial development has caused economic growth in india since 1996. There is even evidence that the approach focuses on the ties between growth and the level of financial development is a good predictor of quality of the functions provided by the financial system.
Sep 05, 20 three measures of financial development are used. Financial development and economic growth in the mena region. Tsionasb adepartment of economic and regional development, panteion university, leof. Always, financial sector has a central role in development and economic growth. Hence, the objective of this paper is to increase the understanding of the relationship between. The study concludes that most of the research done on the causal relationship between financial development and investment is highly skewed towards assessing the causal relationship between the bankbased side of financial development, as compared to. Assessing the evidence philip arestis and panicos demetriades in this paper we take a fresh look at the empirical evidence on the relationship between financial development and economic growth with a view to identifying outstanding issues and offering some suggestions about how these may be. Oct 20, 2016 the paper examines the relationship between financial development and economic growth using panel data for five emerging south asian countries bangladesh, india, nepal, pakistan and sri lanka. Both theoretical and empirical evidence find a clear positive link between financial development and economic growth, thereby suggesting that policy makers should take into account the role of financial systems to sustain growth. Syngrou 6, 17671, athens, greece bdepartment of economics, athens university of economics and business, athens, greece. Previous research conducted focusing on the latin american region found support for both a negative and a positive impact of financial development on economic growth. Assessing the evidence, economic journal, may 1997, 107, 78399. Financial development and economic growth in an oilrich economy. The bulk of the historical evidence suggests that nancial development a.
Evidence from highly disaggregated italian data cristian barra, sergio destefanis and giuseppe lubrano lavadera abstract in this paper we test the nexus between financial development and economic growth upon territorially highly. Arestis, philip and demetriades, panicos 1997, financial development and economic growth. The heterogeneous panel data is collected from the world bank for the period of 1974 to 2012. In relation to financial liberalisation, we offer new evidence on the direct effects of financial repression, using the example of south. Journal of economic development 49 volume 43, number 1, march 2018 financial development and economic growth. Evidence from zimbabwe article pdf available in investment management and financial innovations 2. Evidence from our data suggests that financial development undermines economic growth in ghana. Financial development, economic growth, transitional dynamics jel classi cation. A quantitative reassessment of the financegrowth nexus. Using time series analysis, hondroyiannis et al 2005 find a bilateral causal relationship between financial development and economic growth for greece. The relationship between economic growth and financial. Comparison of financial depth in developing asia versus oecd 10 b.
O, financial development and economic growth assessing the evidence. The impact of financial development on economic growth. Economic growth, financial development, and income inequality. Jan 30, 2012 financial development and economic growth.
The paper examines the relationship between financial development and economic growth using panel data for five emerging south asian countries bangladesh, india, nepal, pakistan and sri lanka. The role of financial development on economic growth has also received considerable attention at empirical level. Financial liberalization, financial development and. Financial development and economic growth in underdeveloped countries, economic development and cultural change 14. Financial development and total factor productivity. Hence the relationship between financial development and economic growth appears to be essential. Evidence from our data suggests that financial development undermines. We acknowledge financial support from the esrc grant no. Impact of financial development on economic growth in iran. This paper investigates the relationship between financial development and economic growth for the case of china over the period 19522001. The first goal is to investigate the influence of stock market development on economic growth for a group of 14 transition economies from the central and southeast european csee region in the period 20022012, while the second is to analyze the main characteristics and specificities of the stock market in the republic of macedonia.
After considering the time series characteristics of the dataset, a multivariate vector autoregressive var framework is used as an appropriate specification and the longrun relationship among financial development, growth and other key growth factors. Specifically, we analyze the impact of mobile phone penetration on economic growth rates in africa. Introduction the importance of the relationship between financial development and economic growth has been well recognized and emphasized in the field of economic development. The purpose of this paper is to shed light on the role ict development, especially mobile phone penetration, can play in promoting financial inclusion and economic growth. There is sufficient economic literature which reveals that a well functioning financial system increases economic efficiency, investment and growth. The causal relationship between financial development and. Assessing the evidence, keele department of economics discussion papers 19952001 9616, department of economics, keele university.
Some caribbean empirical evidence edward e ghartey university of the west indies, jamaica the paper examines the role of financial development and economic growth in barbados, jamaica and trinidad and tobago. Continuous efforts should be undertaken to promote the development of the islamic banking industry due to its significant contribution to malaysias economic growth by further improving the islamic financial infrastructure, increasing the pool of human capital in the islamic banking industry, providing conducive legal environment to the ibfis and maintaining. Assessing the impact of private sector credit on economic. So this study examines whether financial development leads to economic growth. Financial development and economic growth in the united states johansen cointegration analysis open in new tab the interpretation of the two cointegrating vectors for each country, even though not straightforward, does nevertheless manage to throw some light on the economic relationships in hand.
The study was motivated by the current debate regarding the role of financial development in the economic growth process, and their causal relationship. The debate centres on whether financial development impacts positively or negatively on economic growth and whether it grangercauses economic growth or vice versa. Financial development and economic growth are shown to be closely related as discussed by previous literature starting from schumpeter 1911. The dynamic interactions between the growth of real gross domestic product and indicators of financial development are investigated using the concept of granger causality after testing for cointegration using both the englegranger and johansen techniques. Financial development, economic growth and banking sector controls. I have presented chapter 4 titled is the relationship between financial development and economic growth monotonic. Section 2 contains a short survey of the financegrowth nexus. Jan 30, 2012 financial development and economic growth in the united states johansen cointegration analysis open in new tab the interpretation of the two cointegrating vectors for each country, even though not straightforward, does nevertheless manage to throw some light on the economic relationships in hand.
The study concludes that most of the research done on the causal relationship between financial development and investment is highly skewed towards assessing the causal relationship between the bankbased side of financial development, as compared to the marketbased side of financial development. This study contributes to understanding the role of financial development on economic growth theoretically and empirically. Economic growth, financial development, and income inequality 15 in columns 79, when the stock market capitalization to gdp ratio is used as the proxy for financial development, there is no evidence of the ushaped effect. Most empirical models generally indicate that welldeveloped financial markets enhance the efficiency of resource allocation and faster longrun growth via several channels. The financial market is changed and developed very rapidly in the last decade. The objective of the paper is to seek how financial growth affects economic growth in turkey in the flourishing world. View citations in econpapers 292 track citations by rss feed. This article examines the impact of financial development on economic growth, with consider other variables affecting the economic growth.
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