Financial deepening and economic growth linkages a panel data analysis pdf

This paper examines the causal relationship between financial development and economic growth for 27 mediumincome countries in the period 1970 to 2012. However, a reexamination by favara 2003 of the analysis by levine, loayza and beck 2000 indicate a weak effect at best. This paper examines the empirical relationship between stock market development and economic growth in nepal over the period of 22 years from 1993 to 2014. Pdf this study investigates the dynamic relationship between financial deepening and economic growth in jordan over the period 19922014.

The purpose of this paper is to assess the dynamic impact of financial inclusion on economic growth for a large number of developed and developing countries. Our results indicate that financial development stimulates economic growth. The practical evidence suggests that there is a significant positive relationship between financial development and economic growth. Namely, we ask here whether our canonical model can generate data consistent with the findings in the empirical literature. Multivariatebased granger causality between financial. The relationship between financial deepening and economic growth has attracted significant attention in the economics literature. For the robustness of the results, this paper has also performed timeseries analysis on a single country basis.

Mpra paper from university library of munich, germany. Various effects of the financial deepening came to the centre of academics as well as policymakers. Determinants of economic growth panel data approach. Financial deepening is a term used by economists to refer to increasing provision of financial services. Using panel data analysis, their results show that all financial. On the one hand, cross country and panel data studies find positive effects of financial development on output growth even after accounting for other determinants of growth as well as for potential biases induced by simultaneity, omitted. Economic growth, financial depth and savings nexus in. While this has formed the basis for optimism about the growth potential of these countries, there have also been concerns that these countries have been experiencing a period of excessive credit growth an offshoot of rapid financial deepening which in turn is hampering growth and aggravating financial instability. The relationship between financial development and economic growth has been a key study in economics field for a long time. This paper examines the link between financial development and economic growth in 7 subsaharan african countries nigeria, south africa, lesotho, malawi, sierra leone, botswana and kenya, over the period of 198120. The longrun panel estimates indicate that financial development has a positive and significant impact on economic growth. On one hand, crosscountry and panel data studies find a positive effect of financial depth on economic growth after accounting for other determinants of growth and potential biases induced by simultaneity, omitted variables or countryspecific effects levine, 2005, suggesting that the causality runs from finance to growth see christopoulos. Arestis p, demetriades po, luintel kb 2001 financial development and economic growth. Financial deepening and economic growth north american.

The rate of economic growth has depressed significantly in most of the economies in the world since the financial crisis of 2008. Jan 01, 2007 read financial deepening and economic growth linkages. The asymmetric influence of financial development on economic. The relationship between financial development and economic growth has been studied long time in economics adam smith and schumpeter. Financial deepening can have an effect on both individuals and societies economic situations. The role of financial inclusion on economic growth. We apply the bayerhanck combined cointegration approach to examine the long run relationship between the variables. According to the results of the analysis, domestic credits to private sector as % of gdp negatively affect economic growth. The results of the cointegration analysis provide evidence of the existence of a longrun relationship between financial development and economic growth. Using unbalanced panel data for 28 states and union territories between 1973 and 2004, we estimate models in which the poverty ratio is explained by financial deepening, controlling for international openness, inflation rate, and economic growth. The paper examines whether a longrun relationship between financial. Khalil mhadhbi phd in economic sciences, unit of research ps2d prospective strategy and sustainable development, faculty of economic sciences and management of tunis.

A system gmm panel analysis with application to 7 ssa countries. Economic growth is represented by gdp growth rate, and for financial development, five. Financial deepening, foreign direct investment and output. Many economists support the theory that financial development spurs economic growth. The association between economic growth and financial deepening has been a wideranging subject of experiential research. A large literature dating back as far as schumpeter 1911 emphasize the positive influence of the development of a countrys financial sector and the rate of growth of its per capita income. New proxy of financial development and economic growth in. According to ansari 2000 financial development includes financial deepening, financial broadening and financial liberalization that take into account the number and the role of financial institutions, financial. The data cover the regressions according to the maximum of 110 countries and at least 10. Financial deepening and economic growth in the european transition economies rajmund mirdala faculty of economics, technical university of kosice, slovakia rajmund. This paper deals with the empirical investigation of causal relationship between financial deepening, economic growth and poverty reduction using quarter frequency data in case of pakistan over the period of 19722011. Financial deepening and economic growth in transition.

In kenya, based on how a financeinterest rate linkage affects growth, odhiambo 2009a found that interest rate liberalization heightens financial deepening, with efficacy level determining their scale of heightening as economic growth is also boosted by financial deepening. This study examines the relationship between financial deepening, foreign direct investment and output performance in nigeria from 19802015 using the autoregressive distributed lag. In this study, the effect of financial development on the growth in 12 countries joining the eu after 2004 was analysed by using data of the period 20042012. Determinants of economic growth panel data approach edwin dewan shajehan hussein working paper 0104 may 2001 economics department reserve bank of fiji suva fiji the views expressed herein are those of the authors and do not necessarily reflect those of the reserve bank of fiji.

The study concludes that financial deepening produces positive economic growth. This paper examines the link between financial development and economic growth in 7 sub. Financial deepening and economic growth in the european transition economies mirdala, rajmund. The results show that financial development has not led to economic growth in the panel of the selected countries when domestic credit provided by the banking sector is used as a proxy for financial. The main advantage of this approach is that we are able to use enough data to estimate parameters in panel data regression and other multivariate analysis techniques that otherwise could not be estimated for a single country, and yet document the finance growth. A bootstrap rolling window estimation was used to evaluate granger causality between financial deepening and economic growth over different time periods.

The relationship between financial deepening and economic growth has been debated extensively in the literature. The economic growth has been measured by real gdp per capita, and stock market development has been measured by market capitalization of nepal stock exchange nepse. The results show, for three countries the findings support. On the other hand it is not clear how to estimate general linkage and relationship between a the financial sector development and the financial deepening and b the international financial. The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies. This paper examines empirically whether financial deepening has contributed to poverty reduction in india.

Evidence from the organization for economical cooperation and development countries, international journal of economics and financial issues, 7 3, pp. How has financial deepening affected poverty reduction in. Assessing the impact of private sector credit on economic. Empirical data analysis of singapores trade relations with south asia, particularly india. Financial development and manufacturing performance. The effects of financial development and institutional quality on economic growth with the dynamic panel data generalized moment method method.

The paper examines whether a longrun relationship between financial development and economic growth exists employing panel integration and cointegration techniques for a dynamic heterogeneous panel of 15 oecd and 50 nonoecd countries over the period 19752000. The relationship between financial deepening and economic. Financial deepening dynamics and implication for financial. Therefore this study provides evidence on the role of financial development in accounting for economic growth in 23 oecd countries that are italy, greece, iceland via panel data analysis using the. We applied the autoregressive distributed lag model bounds testing approach by incorporating structural breaks stemming in the series. Brazil, russia, india, china and south brics during 1993 to 2014 using banking sector and stock market development indicators. The economic growth has been measured by real gdp per capita, and. This study examines the relationship between financial deepening, foreign direct investment and output performance in nigeria from 19802015 using the autoregressive distributed lag ardl bound test approach. Financial inclusion and economic growth utilizing panel co. Theories on the effect of financial development on income distribution offer. The linkage between financial deepening and economic growth is well documented in both the. Impact of bank credits on economic growth and inflation. The linkage between financial inclusion and log of gdp. Abbey study 2012 examined the impact of inflation on financial development in ghana using quarterly timeseries data 19902008.

Financial deepening indicators and economic growth in. The analysis finds not only that this papera product of the office of the chief economist, latin america and the caribbean regionis part of a. The study applied both static and dynamic panel data. A panel data analysis nicholas apergis, ioannis filippidis, and claire economidou university of piraeus, piraeus. Parallel to this interest in literature, this study researched the relationship between economic growth and financial development in the period 19802012 of 23 oecd countries for panel data analysis. Data for the study are collected mainly from secondary sources such as statistical bulletins of the central bank of nigeria c. Apergis n, filippidis i, economidou c 2007 financial deepening and economic growth linkages. Financial deepening indicators and economic growth in nigeria. A panel data analysis by nicholas apergis, ioannis filippidis and claire economidou no static citation data no static citation data cite. Utrecht school of economics, university of utrecht abstract. Impact of bank credits on economic growth and inflation 61 level movement in iran. This paper empirically examines economic and financial linkages for emerging asian economies for the period 2000 to 2014. Evren damary november 2006 abstract this paper analyzes the e. Read financial deepening and economic growth linkages.

In light of this discussion, this paper examines the nexus between financial deepening and economic growth using a. Within the limitations of country level data, the imf has related financial inclusion with a number of macroeconomic outcomes, including economic growth, stability and equality sahay et al. The empirical findings in the paper show a two way causality bidirectional between financial development and economic growth. The relationship between financial deepening and economic growth. Broad money supply, private credits, financial system deposit liabilities and deposit money banks assets are determined as proxies of financial deepening. Imports results obtained using the generalized method of moments dynamic panel show that the variable that. The effect of financial development on economic growth. The nigerian case, studies in business and economics, lucian blaga university of sibiu, faculty of economic sciences, vol. This paper reexamines the empirical relationship between financial development and economic growth. This study investigates the dynamic relationship between financial deepening and economic growth in jordan over the period 19922014. This study revisits the impact of financial development on economic growth in south africa by incorporating trade openness in the production function. Financial sector deepening and economic growth topics in. The longrun and shortrun elasticities were estimated by the use of autoregressive distributed lag ardl bounds testing approach for cointegration analysis.

Although many studies have focused the developing countries to explore relationships between growth and financial. The study examines the relationship between financial deepening and economic growth in the turkish economy for the period from 1984. It can refer both a wider choice of services and better access for different socioeconomic groups. Utrecht school of economics, university of utrecht. The results obtained from the analysis confirmed a positive relationship between financial development and economic growth. Their analysis suggests that financial inclusion can be positively. Stock market development and economic growth in nepal. We show here that regression studies cannot capture true linkages among economic growth, financial deepening, and inequality, when the underlying economy is on a transitional growth path.

The author has used savings as an intermitting variable to examine the dynamic causal relationship between economic growth and financial deepening. Financial development and economic growth in subsaharan. Authorized for distribution by abdelhadi yousef december 20. The findings confirm the requirement for robust interest reforms. Financial deepening, trade openness, and economic growth. A panel analysis of economic shocks and loan portfolio quality prepared by inessa love and rima turk ariss. Three different measures of financial deepening are used to capture the variety of different channels through which financial. The study therefore made use of the cointegration approach the granger causality testing procedure. The effect of financial deepening on economic growth in kenya.

The beneficial role of financial development in economic growth has been well documented. Institut fur weltwirtschaft kiel institute for the world economy, vol. Finally, the study performs the granger panel causality test in a trivariate var and found that causality runs from financial deepening to economic growth through trade openness for countries of both wamz and waemu. The remaining of the study is organized as follows. Jan 01, 2006 we show here that regression studies cannot capture true linkages among economic growth, financial deepening, and inequality, when the underlying economy is on a transitional growth path. The study applied both static and dynamic panel data approach, to investigate the relation between financial development and economic growth. The study uses panel data for the period 199020 for developing economies of asia. A panel data analysis this paper contributes empirically to our understanding of informed traders. We develop a new proxy for financial development that refers to the input of real resources into the financial system and apply the panel bootstrapped approach to granger causality. This paper examines the effects of financial inclusion on the economic growth of nigeria 19822012. This paper investigates macrofinancial linkages in egypt using two complementary. The relationship between financial development and economic growth has been a. A system gmm panel analysis with application to 7 ssa countries r.

Phd in economic sciences, unit of research ps2d prospective strategy and sustainable development, faculty of economic sciences and management of tunis. Table 1 show past, present and future trends of economic growth. Does islamic insurance development promote economic growth. Request pdf financial deepening and economic growth linkages. Financial deepening and economic growth in pakistan. The causal relationship of the finance growth nexus has important policy implications for the economy. A panel data analysis this paper contributes empirically to our understanding of. In view of this fact, the present study is an attempt to explain the impact of institutional quality on economic growth in developing economies of asia. Santos alimi economics department, adekunle ajasin university akungbaakoko,ondo state, nigeria email.

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