On the Causal Nature between Financial Development and Economic Growth in the Democratic Republic of the Congo: Is it Supply Leading or Demand Following?

This paper seeks to study and answer the question on the nature and direction of the causality between financial development and economic growth in the Democratic Republic of the Congo (DRC) using data from 2004 to 2019. The long-term relationship not being robust, we opted for the short-term dynamics with the causality test in the sense of Granger to support this question. The results indicated the existence of a one-way causality from economic growth to financial development. This result is in line with the Demand following hypothesis, given the country’s economic and financial landscape, which presents a less deep financial system. Consequently, choices of growth policies (increase in knowledge, infrastructure, pleasant business climate, structural reforms, etc.) should be adopted to enhance and develop the Congolese financial system. However, we recognize that once growth is restored and becomes sustainable, financial development could lead to sustained and resilient economic growth.

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The drivers of economic growth in China and India: globalization or financial development?

International Journal of Development Issues ◽

10.1108/ijdi-06-2016-0036 ◽

2017 ◽

Vol 16 (1) ◽

pp. 54-84 ◽

Cited By ~ 13

Author(s):

Magda Kandil ◽

Muhammad Shahbaz ◽

Mantu Kumar Mahalik ◽

Duc Khuong Nguyen

Keyword(s):

Economic Growth ◽

Financial Development ◽

Emerging Market ◽

Annual Data ◽

Test Results ◽

Causality Test ◽

Content Type ◽

China And India ◽

Integration Test ◽

The Impact

Purpose Using annual data from 1970 to 2013 for China and India, this paper aims to examine the impact of globalization and financial development on economic growth by endogenizing capital and inflation and drawing comparisons between the two fastest growing emerging market economies. Design/methodology/approach In the long run, co-integration test results indicate that financial development increases economic growth in China and India. Findings The results also reveal that globalization accelerates economic growth in India but, surprisingly, impairs economic growth in China, as it increases competition for exports. The results furthermore disclose that acceleration in capitalization and inflation, as a proxy for aggregate demand, are positively linked to economic growth in China and India. Originality/value Causality test results indicate that both financial development and economic growth are interdependent. In contrast, causality runs from higher economic growth to increased globalization in India, while the results do not support long-term causality between globalization and economic growth in China.

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The relationship between financial development and economic growth in Eswatini (formerly Swaziland)

African Journal of Economic and Management Studies ◽

10.1108/ajems-06-2021-0291 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Siphe-okuhle Fakudze ◽

Asrat Tsegaye ◽

Kin Sibanda

Keyword(s):

Economic Growth ◽

Granger Causality ◽

Financial Development ◽

Granger Causality Test ◽

Causality Test ◽

Content Type ◽

Distributed Lag ◽

Long Run ◽

Short Run ◽

The Relationship

PurposeThe paper examined the relationship between financial development and economic growth for the period 1996 to 2018 in Eswatini.Design/methodology/approachThe Autoregressive Distributed Lag bounds test (ARDL) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. The Granger causality test was also performed to establish the direction of causality between financial development and economic growth.FindingsThe ARDL results revealed that there is a long-run relationship between financial development and economic growth. The Granger causality test revealed bidirectional causality between money supply and economic growth, and unidirectional causality running from economic growth to financial development. The results highlight that economic growth exerts a positive and significant influence on financial development, validating the demand following hypothesis in Eswatini.Practical implicationsPolicymakers should formulate policies that aims to engineer more economic growth. The policies should strike a balance between deploying funds necessary to stimulate investment and enhancing productivity in order to enliven economic growth in Eswatini.Originality/valueThe study investigates the finance-growth linkage using time series analysis. It determines the long-run and short-run dynamics of this relationship and examines the Granger causality outcomes.

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Foreign Direct Investment, Financial Development and Economic Growth Evidence from Saudi Arabia

International Journal of Financial Research ◽

10.5430/ijfr.v8n4p228 ◽

2017 ◽

Vol 8 (4) ◽

pp. 228 ◽

Cited By ~ 1

Author(s):

Najeeb Muhammad Nasir ◽

Mohammed Ziaur Rehman ◽

Nasir Ali

Keyword(s):

Economic Growth ◽

Foreign Direct Investment ◽

Financial Development ◽

Direct Investment ◽

Impulse Response Function ◽

Saudi Arabian ◽

Causality Test ◽

Long Run ◽

Oil Resources ◽

Integration Test

This study is an effort to explain and establish a relationship among foreign direct investment, financial development and economic growth in Saudi Arabian context for the period of 1970 to 2015 by employing Vector Auto Regression (VAR) and modified Granger Casualty Models. The result of Johansen co-integration test illustrates that no long run co-integration can be established among the variables. VAR has established a link between economic growth, financial development and foreign direct investment. The Granger causality test also confirms that economic growth causes foreign direct investment and financial development which is a unidirectional causality running from economic growth towards foreign direct investment and financial development. No significant causality can be observed empirically between foreign direct investment and financial development. This feature can be attributed to the fact that Saudi Arabian economy is still heavily dependent on its oil resources which is the driving force behind growth. Impulse Response Function has been utilized in order to observe the response to the shocks among the variables.

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Financial Development and Economic Growth: Time Series Analysis of Economy of Pakistan

International Finance and Banking ◽

10.5296/ifb.v5i2.14091 ◽

2018 ◽

Vol 5 (2) ◽

pp. 59

Author(s):

Muhammad Shoukat Malik ◽

Raisham Hayee ◽

Raima Adeel

Keyword(s):

Economic Growth ◽

Time Series ◽

Time Series Analysis ◽

Causal Relationship ◽

Financial Development ◽

Granger Causality Test ◽

Growth Time ◽

Annual Data ◽

Causality Test ◽

Stationary Level

This study aims in understanding the causal relationship between financial development and economic growth. This research used annual data and applied dickey fuller test and granger causality test in order to understand stationary level and causation in variables. The results of this test give support to first hypothesis that financial development causes economic growth. While no evidence was found on the support of our second hypothesis i.e. economic growth is causing financial development.

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Investigating the Roles of Physical Infrastructure, Financial Development and Human Capital on Economic Growth in Bangladesh

Journal of Infrastructure Development ◽

10.1177/0974930620961479 ◽

2020 ◽

Vol 12 (2) ◽

pp. 154-175

Author(s):

Faroque Ahmed ◽

Md. Jamal Hossain ◽

Mohammad Tareque

Keyword(s):

Economic Growth ◽

Human Capital ◽

Financial Development ◽

Causality Test ◽

Distributed Lag ◽

Dynamic Relationship ◽

Autoregressive Distributed Lag ◽

Physical Infrastructure ◽

Long Term Impact

This article investigates the dynamic relationship among physical infrastructure, financial development, human capital and economic growth in Bangladesh, employing Autoregressive Distributed Lag (ARDL) bound co-integration and Granger causality test for the period 1985–2019. The study finds a significantly positive long-term impact of physical infrastructure and human capital on economic growth. However, the effect of financial development on growth is found to be negative, and the result suggests that financial development will take place with economic growth. From the policy perspective, this study emphasises increasing investment in physical infrastructure and human capital for Bangladesh to foster long-term economic growth.

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Exports, financial development and economic growth in Pakistan

International Journal of Development Issues ◽

10.1108/ijdi-09-2013-0065 ◽

2014 ◽

Vol 13 (2) ◽

pp. 155-170 ◽

Cited By ~ 15

Author(s):

Muhammad Shahbaz ◽

Mohammad Mafizur Rahman

Keyword(s):

Economic Growth ◽

Error Correction ◽

Financial Development ◽

Error Correction Model ◽

Causality Analysis ◽

Bounds Testing ◽

Causality Test ◽

Correction Model ◽

Content Type ◽

Long Run

Purpose – This paper aims to explore the relationship between exports, financial development and economic growth in case of Pakistan. Design/methodology/approach – The autoregressive distributed lag bounds testing approach to cointegration and error correction model are applied to test the long-run and short-run relationships, respectively. The direction of causality between the variables is investigated by the vector error correction model Granger causality test and robustness of causality analysis is tested by applying innovative accounting approach. Findings – The analysis confirms cointegration for the long-run relation between exports, economic growth and financial development in case of Pakistan. The results indicate that economic growth and financial development spur exports growth in Pakistan. The causality analysis reveals feedback hypothesis that exists between financial development and economic growth, financial development and exports, and, exports and economic growth. Originality/value – This study provides new insights for policy makers to sustain exports growth by stimulating economic growth and developing financial sector in Pakistan.

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Bank-Based Financial Development and Economic Growth: Time-Varying Causality Analysis for Egypt

International Journal of Economics and Finance ◽

10.5539/ijef.v10n4p123 ◽

2018 ◽

Vol 10 (4) ◽

pp. 123

Author(s):

Amira Akl Ahmed

Keyword(s):

Economic Growth ◽

Financial Development ◽

Structural Breaks ◽

Growth Time ◽

Time Varying ◽

Causality Analysis ◽

Causality Test ◽

Full Sample ◽

Rolling Window ◽

The Government

The bootstrap approach to Toda-Yamamoto (1995) modified causality test is applied in a rolling window of fixed size onto Egyptian data during 1960-2016 to examine time-varying links between economic growth (EG) and bank-based financial development (BBFD). Full sample results indicated the existence of unidirectional causality running from BBFD to EG, however; instability tests revealed the presence of structural breaks. Given the misleading inferences made using the full sample, the rolling window procedure is applied. Bidirectional time-varying causality between EG and BBFD was detected. Reasons behind declining the fraction of credit provided to private business sector to GDP in recent years include, mainly, credit crunch and expansion of credit to the government and partially to economic slowdown. Adoption of fiscal reforms and promotion of innovative financial tools suitable for the needs of small and medium-sized enterprises is highly recommended to enhance the role of banking system in promoting economic growth.

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The Relation between Tourism and Economic Growth: A Case of Saudi Arabia as an Emerging Tourism Destination

Virtual Economics ◽

10.34021/ve.2020.03.04(2) ◽

2020 ◽

Vol 3 (4) ◽

pp. 29-47

Author(s):

Lamia Jamel

Keyword(s):

Economic Growth ◽

Saudi Arabia ◽

Granger Causality ◽

Co2 Emissions ◽

Financial Development ◽

Positive Impact ◽

Trade Openness ◽

Granger Causality Test ◽

Annual Data ◽

Causality Test

This paper examines empirically the relation between tourism and economic growth in Saudi Arabia. The authors try to justify how tourism contributes to the economic growth of Saudi Arabia. There are applied descriptive statistics, unit root test, VAR model and Granger Causality test as an econometric methodology to examine the connection between tourism and economic growth in Saudi Arabia for the annual data in the period from 1990 to 2018. The main empirical results of the study find out that tourism affects positively the economic growth in Saudi Arabia. Also, there is found a positive nexus among tourism and economic growth. Furthermore, CO2 emissions and financial development impact positively the tourism sector, while trade openness predicts a negative effect on tourism. Additionally, CO2 emissions, financial development, and trade openness have a positive impact on economic growth in Saudi Arabia. Finally, the Granger causality test provides evidence of bidirectional nexus between tourism and economic growth in Saudi Arabia. This paper contributes to the current research by explaining the causal nexus among tourism and economic growth in Saudi Arabia during the period from 1990 to 2018, applying a vector autoregressive model and Granger Causality.

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Direction of Causality between Financial Development and Economic Growth in Turkey

Journal of Economics Management and Trade ◽

10.9734/jemt/2021/v27i930365 ◽

2021 ◽

pp. 22-37

Author(s):

Cengiz Yılmaz ◽

Banu Demirhan

Keyword(s):

Economic Growth ◽

Time Series ◽

Gross Domestic Product ◽

Financial Development ◽

The Other ◽

Development Indicators ◽

Short Run ◽

Causality Relationship ◽

Using Data

This paper has investigated the causality relationship between financial development and economic growth in Turkey, using data from 2005:04 to 2020:03. We construct a time-series model to explore causality relationships between the variables. In the study, two indicators were used as financial development indicators: banking loans to the private sector and money supply to GDP (Gross Domestic Product). The empirical results have represented a bi-directional relationship between financial development and economic growth in the short run. On the other hand, we have not found a causality relationship in the long term.

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Financial Development and Economic Growth: The Case of Greek Economy

International Journal of Accounting and Finance Studies ◽

10.22158/ijafs.v1n2p173 ◽

2018 ◽

Vol 1 (2) ◽

pp. 173

Author(s):

Pavlos Stamatiou ◽

Nikolaos Dritsakis

Keyword(s):

Economic Growth ◽

Granger Causality ◽

Financial Development ◽

Trade Openness ◽

Cointegration Analysis ◽

Development Economic ◽

Causality Tests ◽

Greek Economy ◽

Causal Impact ◽

Using Data

This paper examines the relationship among financial development and economic growth, within a framework which also accounts trade openness, for the case of Greece using data covering the period 2001-2017. We investigate this relationship using the Johansen and Juselius (1990) cointegration approach and the Vector Error Correction Models (VECM), employing Granger causality technique, in order to explore the presence of causality among the variables. The results of cointegration analysis suggested that there is one cointegrated vector among the functions of financial development, economic growth and trade openness. Granger causality tests have shown that there are unidirectional causalities running from economic growth to financial development as well as from financial development to trade openness. The results support that financial development and trade openness do not have causal impact on economic growth in Greece, for the aforementioned period. On the other hand, economic growth has a causal impact on trade both directly and indirectly through financial development.

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