scholarly journals The Relationship between Innovation, Financial Development, and Economic Growth : Testing in ASEAN Countries for the Period 1986-2015

2019 ◽  
Vol 2 (1) ◽  
pp. 23-48
Author(s):  
Diah Saputri ◽  
Harmadi Harmadi
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Banking Sector ◽  
Secondary Data ◽  
Principal Component ◽  
Causality Test ◽  
Asean Member ◽  
The World ◽  
The Difference ◽  
The Relationship

This study aims to determine the relationship between innovation, financial development, and economic growth. Innovation is measured by patents, and economic growth is measured by the percentage of GDP per capita, while financial development is measured by seven indicators, namely banking sector development. Index formation is done through the Principal Component Analysis (PCA), with the note of the variable were defined earlier. This study uses data from ten ASEAN member countries with observation periods from 1986-2015. Research data is secondary data derived from the World Development Indicator and Global Financial Development at the World Bank. The analytical method used in this study is granger causality test, VECM, and IRF and FEVD analysis. The results showed that there were several differences in results in the direction of the three relationships. This difference is due to the difference in proxy that used in the study. There are three cases in this study. Broadly speaking, the relationship between financial development and economic growth is a unidirectional causality from financial development to economic growth. On the other hand, testing on economic growth with innovation shows a bidirectional causality. On the relationship between financial development and innovation, there are unidirectional causality from innovation to financial development. Nevertheless, the relationship between the three variables shows a long-term relationship.

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

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.

scholarly journals The relationship between banks' credit activity and economic growth: An empirical research for the Republic of Serbia

Industrija ◽  
2020 ◽  
Vol 48 (2) ◽  
pp. 37-53
Author(s):  
Milka Grbić ◽  
Stevan Luković
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Research Study ◽  
Causality Test ◽  
Real Gdp ◽  
Gdp Growth Rate ◽  
Interactive Relationship ◽  
The Republic ◽  
The Relationship ◽  
Different Order

The subject matter of the research study conducted in this paper is the interactive relationship between banks' credit activity and economic growth. In connection with that, the paper is aimed at examining the existence and direction of the cause and effect relationship between the credit activity of the banking sector and the overall economic activity in the Republic of Serbia. The quarterly data related to the period from 2003 to 2019 were collected for the purposes of the research. The share of the loans granted to enterprises in the GDP and the share of the loans granted to households in the GDP are used as the indicators of the credit activity in the study, whereas the real GDP growth rate is determined as the indicator of economic growth. Given the fact that the observed time series are of the different order of integration, the analysis is conducted within the VAR model by applying the Toda-Yamamoto procedure of the Granger causality test. The results of the research show a significant unidirectional causal relationship according to Granger, which starts from the direction of banks' credit activity towards economic growth. The results of the conducted research study can be useful to the makers of the economic policy and the creators of a strategy for the development of the national economy.

scholarly journals A panel causality analysis of the relationship between financial development and economic growth in OECD countries

2021 ◽  
Vol 9 (2) ◽  
pp. 662-672
Author(s):  
Sevilay Küçüksakarya
Keyword(s):  
Economic Growth ◽  
Private Sector ◽  
Financial Development ◽  
Gdp Growth ◽  
Causality Test ◽  
Panel Causality ◽  
Per Capita Gdp ◽  
Domestic Credit ◽  
Per Capita ◽  
The Relationship

This study examines the relationship between financial development and economic growth. Thus, this study aims to find empirical shreds of evidence for the direction of the causality between financial development proxied by domestic credit to the private sector and per capita GDP growth by using the panel granger causality test of the Dumitrescu-Hurlin Test. For this purpose, we used a panel of 16 OECD countries from 2008 to 2019 to provide evidence of whether the supply leading hypothesis or demand following hypothesis or both holds. All econometric exercises are carried out for whole countries and high-income countries, and upper-middle-income country groups in the sample. Due to cross-sectional dependence among the sample countries, we determine the degree of integration of each variable by employing the second-generation panel unit root tests of CIPS. We continue our analysis with the panel causality test developed by Dumitrescu and Hurlin (2012) to determine the direction of the causality between variables. For this purpose, we performed three sets of causality analyses. In the first one, we include all countries in the panel. We then divided the countries into two sub-groups based on the income classification and the level of financial development in these countries proxied by domestic credit to the private sector. The causality test results, including all countries in the sample, indicate that the hypothesis holds the supply leading hypothesis during the sample period. This means that even though this panel contains countries with a development level, financial development still seems to be a pre-condition for economic growth for these nations. We also obtain the same results when we include high-income countries in the sample. The study results provide compelling evidence for the relationship between economic growth and financial development since the sample includes countries with different levels of financial development with different degrees of per capita GDP growth.

scholarly journals Examining the Relationship between Financial Development and Economic Development

2014 ◽  
Vol 1 (1) ◽  
Author(s):  
K. V. Bhanu Murthy
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Financial Development ◽  
Principal Component ◽  
The Other ◽  
Financing Constraints ◽  
Regression Equations ◽  
External Financing ◽  
Financial Systems ◽  
The Relationship

Relationship between financial development and economic growth is a long-debated issue. The objective of this study is to determine if a relationship exists between financial development and economic growth. Better functioning financial systems ease the external financing constraints that impede firm and industrial expansion. On the other hand, changes in economic activity and economic growth can influence financial systems. With the help of Principal Component Analysis, we develop two indices - one for ‘financial development’ and the other for ‘economic development’. Through a set regression equations, we find that the elasticity of ‘financial development’ with respect to ‘economic development is 0.37 and elasticity of ‘economic development’ with respect to ‘financial development’ is 1.69. The gains from financial development are much greater.

scholarly journals Financial development and economic growth: panel evidence from BRICS

2019 ◽  
Vol 24 (47) ◽  
pp. 113-126 ◽  
Author(s):  
Biplab Kumar Guru ◽  
Inder Sekhar Yadav
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Financial Development ◽  
Banking Sector ◽  
Market Development ◽  
Content Type ◽  
Stock Market Development ◽  
Development Indicators ◽  
Banking Sector Development ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies: Brazil, Russia, India, China and South (BRICS) during 1993 to 2014 using banking sector and stock market development indicators. Design/methodology/approach To begin with, the study first examined some of the principal indicators of financial development and macroeconomic variables of the selected economies. Next, using generalized method of moment system estimation (SYS-GMM), the relationship between financial development and growth is investigated. The banking sector development indicators used in the study include size of the financial intermediaries, credit to deposit ratio (CDR) and domestic credit to private sector (CPS), whereas the stock market development indicators are value of shares traded and turnover ratio. Also, some macroeconomic control variables such as inflation, exports and the enrolment in secondary education were used. Findings The examination of the principal indicators of financial development and macroeconomic variables have shown considerable differences between the selected economies. Results from the dynamic one-step SYS-GMM estimates confirm that in presence of turnover ratio, all the selected banking development indicators such as size of financial intermediaries, CDR and CPS are positively significantly determining economic growth. Similarly, in presence of all the selected banking sector development indicators, value of shares traded is found to be positively significantly associated with economic growth. However, the same is not true when turnover ratio is regressed in presence of banking sector variables. Overall, the evidence suggests that banking sector development and stock market development indicators are complementary to each other in stimulating economic growth. Practical implications A positive association between financial development and growth indicates that the policymakers should take necessary measures toward simultaneous development of both banking sector as well as stock market for inducing growth. Originality/value The present paper attempts to examine the relationship between financial development and growth using both banking sector and stock market development indicators which has not been attempted before for BRICS. Also, most of the existing studies are found in case of developed economies. This paper tries to fill this void by studying five major emerging economies.

The Relationship Between Economic Growth and Banking Sector Development in Ukraine

2022 ◽  
Vol 19 ◽  
pp. 222-230
Author(s):  
Svitlana Kachula ◽  
Maksym Zhytar ◽  
Larysa Sidelnykova ◽  
Oksana Perchuk ◽  
Olena Novosolova
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Positive Impact ◽  
Limiting Factors ◽  
Causality Test ◽  
Bank Deposits ◽  
Real Gdp ◽  
Banking Sector Development ◽  
Spatial Dimensions ◽  
The Relationship

The paper examines the relationship between economic growth and banking sector indicators in Ukraine. The constructed empirical model revealed a positive impact of bank deposits on real GDP growth. The causal relationships between economic growth in Ukraine and the performance of the banking sector are analyzed using the Granger Causality Test. It is established that banking deposits Granger-cause GDP, while banking credits do not, but GDP has an effect on banking credits. It is noted that the banking sector of Ukraine does not play a significant role in the redistribution of capital in the intersectoral and spatial dimensions. It is defined limiting factors of lending to the private sector and ways to increase the deposit base of banks.

scholarly journals Time Series Analysis among Tourism, Financial Development, FDI and Economic Growth in Jordan

2018 ◽  
Vol 10 (12) ◽  
pp. 150
Author(s):  
Muthana Mohammad Omoush
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Bounds Testing ◽  
Causality Test ◽  
Fdi Inflows ◽  
Bounds Testing Approach ◽  
Testing Approach ◽  
The Relationship

This study investigates the relationships among tourism, financial development, FDI inflows and economic growth in Jordan for the (1985-2016) period. The current paper has used bounds testing approach to confirm the relationship among the study variables. Multivariate Granger causality test is used to determine the directions of causality between the study variables. The results confirmed that there is evidenced of relationships among tourism, financial development, FDI inflows and economic growth. Also, the multivariate Granger causality test confirmed deferent directions of causal among the study variables.

scholarly journals An Empirical Analysis of the Impact of Energy Consumption on the Financial Development of the Emerging Economies: A Moderating Role of Oil Prices

2016 ◽  
Vol 8 (9) ◽  
pp. 26
Author(s):  
Faisal Mahmood ◽  
Maria Saleem
Keyword(s):  
Energy Consumption ◽  
Financial Development ◽  
Emerging Economies ◽  
Banking Sector ◽  
Secondary Data ◽  
Oil Prices ◽  
The Impact ◽  
The Relationship ◽  
Moderating Role

<p>This research empirically analyzes the relationship between energy consumption and financial development by making use of secondary data for 22 emerging economies over the period of 1999-2012. Moreover, this paper also spotlights the moderating role of oil prices. Furthermore, financial development is measured by utilizing of various proxies relevant to banking sector and stock market as well. Hence, the findings of the research reveals that oil prices negatively moderates the relationship between energy consumption and financial development. Moreover, results highlight that measures used to calculate financial development are also of key concern to explore the relationship between energy consumption and financial development.</p>

scholarly journals Banking Sector Development And Economic Growth In Hong Kong: An Empirical Investigation

2013 ◽  
Vol 12 (5) ◽  
pp. 519 ◽  
Author(s):  
SY Ho ◽  
NM Odhiambo
Keyword(s):  
Economic Growth ◽  
Hong Kong ◽  
Financial Development ◽  
Banking Sector ◽  
Bounds Testing ◽  
Banking Sector Development ◽  
Domestic Credit ◽  
Bounds Testing Approach ◽  
The Relationship ◽  
Ardl Bounds Testing Approach

In this study, we examine the dynamic relationship between bank-based financial development and economic growth in Hong Kong. We attempt to answer one critical question: Does the relationship between bank-based financial development and economic growth in Hong Kong follow a supply-leading or a demand-following response? In other words, which sector drives economic development in Hong Kong the real sector or the nominal sector? Unlike the majority of previous studies, this study uses the newly developed ARDL-bounds testing approach to examine this linkage. The ARDL-bounds testing approach has numerous advantages over other cointegration techniques, especially when a short time-series dataset is used. In order to test the robustness of the empirical results, two proxies of bank-based financial development have been used; namely: 1) the domestic credit provided by the banking sector as a ratio of GDP and 2) the banks' deposit as a ratio of GDP. Our empirical results show that the relationship between bank-based financial development and economic growth in Hong Kong is sensitive to the proxy used to measure the banking sector development. When domestic credit provided by the banking sector is used as a proxy for bank-based financial development, a distinct supply-leading response is found to prevail. However, when the banks' deposit is used as a proxy for bank development, a demand-following response is found to predominate. These results hold, irrespective of whether the causality is estimated in the short run or in the long run.

Financial development, oil dependence and economic growth

2017 ◽  
Vol 34 (2) ◽  
pp. 281-298 ◽  
Author(s):  
Ramez Abubakr Badeeb ◽  
Hooi Hooi Lean
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Financial Sector ◽  
Causality Test ◽  
Content Type ◽  
The Government ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to examine the validity of the question of whether oil dependence has a negative impact on the relationship between financial development and economic growth in Yemen. Design/methodology/approach The auto-regressive distributed lag approach for cointegration is used to examine the relationship between financial development and economic growth by capturing the impact of oil dependence on this relationship. The Granger causality test, based on a vector error correction model (VECM) framework, is used to investigate the causal relationships between financial development and economic growth. Findings The most interesting finding is the negative sign of interaction term between financial development and oil dependence, which implies that the positive effect of financial development on economic growth decreases with the increasing oil dependence. The result of the VECM Granger causality test revealed the existence of unidirectional causality running from financial development to economic growth. Research limitations/implications The short sample period and the worry of losing degrees of freedom limited us when including control variables in the model. If the data are available in the future, other control variables can be added. Practical implications The government should reduce the level of oil dependence in Yemen by diversifying the country’s economy. Accelerating the pace and efficiency of the financial sector will bear fruitful returns in this regard. The government could achieve this strategy by playing a more proactive role in encouraging the expansion of credit to enable the financial sector to provide a more efficient intermediary role in mobilizing domestic savings and channeling them to productive investments across various economic sectors. Originality/value This is the first study to examine the impact of oil dependence on the finance-growth nexus in Yemen. A new indicator for oil dependence is also proposed.

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