scholarly journals Structural breaks in finance growth nexus: the study of Indonesia

2011 ◽  
Vol 1 (1) ◽  
pp. 1-6 ◽  
Author(s):  
Bidisha Mukhopadhyay
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Financial Development ◽  
Structural Breaks ◽  
Structural Break ◽  
Break Point ◽  
Annual Data ◽  
Data Set ◽  
The Stability ◽  
Finance Growth Nexus

This paper empirically investigates the finance-growth nexus for an annual data set of Indonesia during the last two decades. The purpose is to examine the causal relationship between financial development and economic growth in Indonesia and also to test the structural breaks in the finance-growth relationship to investigate the change in policy regimes. To examine the causal relationship between financial development and economic growth, the newly proposed ARDL bound testing approach by Pesaran et al. (1996) has been applied .The estimated results support the view of Lucas (1988) that finance doesn’t matter for economic growth. Structural break is identified in the year 1997 in Indonesia with the estimated finance-growth relationship. The stability of the estimated relationship is examined with break-point Chow tests (F tests).

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

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.

Financial Deepening and Income Inequality in Nigeria: Evidence from Zivot-Andrews and Gregory-Hansen Structural Break Analyses

2021 ◽  
Vol 39 (8) ◽  
Author(s):  
Bosede Ngozi Adeleye ◽  
Solomon Nathaniel ◽  
Ifeoluwa Ogunrinola ◽  
Edamisan Ikuemonisan
Keyword(s):  
Income Inequality ◽  
Capita Income ◽  
Structural Breaks ◽  
Structural Break ◽  
Break Point ◽  
Annual Data ◽  
Financial Deepening ◽  
Per Capita Income ◽  
Long Run ◽  
Per Capita

Aligning with the Sustainable Development Goal (SDG) 10 agenda, this paper undertakes a structural break analysis on the effects of financial deepening on income inequality in Nigeria using annual data from 1980 to 2015 and error correction approach within the framework of the autoregressive distributed lags (ARDL) model. Major findings are as follows: (1) in the long-run, financial deepening and per capita income have equalising impact on income inequality; (2) an equalising effect of financial deepening is observed at the turn of a break point; (3) surprisingly, in the short-run, financial deepening aggravates inequality, and (4) the equalising effects of these variables are robust to the choice of financial deepening variables, the different structural break points and model specifications. These results suggest that income inequality depends on financial deepening and per capita income and that not controlling for structural breaks may lead to wrong inferences when making decisions on issues related to reducing income inequality in Nigeria.

Bank-based financial development and economic growth

2014 ◽  
Vol 6 (2) ◽  
pp. 112-132 ◽  
Author(s):  
Sheilla Nyasha ◽  
Nicholas M Odhiambo
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Empirical Evidence ◽  
Causal Relationship ◽  
Financial Development ◽  
Design Methodology ◽  
Prima Facie ◽  
Content Type ◽  
Clear Cut ◽  
Finance Growth Nexus

Purpose – The purpose of this paper was to survey the existing literature on the causal relationship between bank-based financial development and economic growth, highlighting the theoretical and empirical evidence from recent work. Although some previous studies have attempted to conduct a survey of the existing research on the finance-growth nexus, the majority of these studies have failed to distinguish between bank-based and market-based financial developments. To our knowledge, this may be the first study of its kind to survey the existing research on the causal relationship between bank-based financial development and economic growth – in both developed and developing countries. Design/methodology/approach – Overall, our study shows that most of the literature reviewed in this paper either supports bidirectional causality between bank-based financial development and economic growth or reinforces the conventional supply-leading response phenomenon. Notwithstanding this outcome, the study also finds the literature in favour of a demand-following response to be increasing – in both number and substance – especially in recent years. Findings – The paper, therefore, concludes that the causal relationship between financial development and economic growth is not clear-cut and that the notion that financial development automatically leads to economic growth is merely based on prima facie or superficial evidence. Originality/value – Although some previous studies have attempted to conduct a survey of the existing research on the finance-growth nexus, the majority of these studies have failed to distinguish between bank-based and market-based financial developments. To our knowledge, this may be the first study of its kind to survey the existing research on the causal relationship between bank-based financial development and economic growth – in both developed and developing countries.

Do Financial Development, Trade Openness and Political Stability Complement for Egypt’s Economic Growth?

2020 ◽  
pp. 2150001
Author(s):  
Zakaria Yakubu ◽  
Nanthakumar Loganathan ◽  
Narayan Sethi ◽  
Asan Ali Golam Hassan
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Financial Development ◽  
Trade Openness ◽  
Government Expenditure ◽  
Political Stability ◽  
The Political ◽  
Annual Data ◽  
Long Run ◽  
Short Run

This study examines the complement of financial development, trade openness, political stability and integrating government expenditure on Egyptian economy using time series annual data covering the period 1977 until 2018. This study used the ARDL-ECM estimates to determine the long and short-run cointegration between the series. The estimated results indicated that the financial development enhances growth in the long-run, while the political stability undermined the economic growth in the long-run. Interestingly, we found financial development, trade openness and government expenditure Granger cause economic growth in the short-run, while political stability Granger causes economic growth in both short and long-run; and a similar result with the causal relationship appeared in the strong causal relationship condition. Overall, this study showed that both financial development and trade openness gave evidence of causing growth, but the political stability does not. Thus, the reform policies should continue, while adopting measures to ensure that all the determinants are complementing to growth in Egypt as they are all pivotal and it is imperative for policy analysts to put into perspective when formulating policies as the study captures a novel political stability variable towards growth.

scholarly journals India’s Finance-Growth Nexus: Cointegration and Causality Analysis with Income Inequality and Globalization

2018 ◽  
Vol 5 (6) ◽  
pp. 12
Author(s):  
Takashi Fukuda
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Financial Development ◽  
Negative Impact ◽  
Structural Break ◽  
Trade Openness ◽  
Cointegration Analysis ◽  
Causality Analysis ◽  
Causality Tests ◽  
Finance Growth Nexus

This paper investigates India’s finance-growth nexus―the relationship between financial development and economic growth―taking the weakly exogenous variables of income inequality, trade openness and financial openness together with the structural break dummy into the cointegration analysis of the vector error correction model. Implementing the Granger causality tests we have detected that both financial size and financial efficiency exhibit a negative impact on economic growth with no feedback from the latter to each of the former. It is important for policy makers to recognize that finance does not always promote economic growth, considering how to convert the effect of financial development from “growth-retarding” to “growth-enhancing”.

The impact of financial development on economic growth

2016 ◽  
Vol 11 (4) ◽  
pp. 569-583 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Structural Breaks ◽  
Regional Cooperation ◽  
Ordinary Least Squares ◽  
Annual Data ◽  
Content Type ◽  
Long Run ◽  
Integration Test ◽  
The Impact

Purpose The purpose of this paper is to investigate the possible co-integration and the direction of causality between financial development and economic growth in South-Asian Association for Regional Cooperation (SAARC) countries using annual data from 1994 to 2013. Design/methodology/approach The Carrion-i-Silvestre et al. (2005) stationarity test with structural breaks is used to check the stationarity. The Westerlund (2006) panel co-integration test is employed to examine the long-run relationship among the variables. To carry out tests on the co-integrating vectors, fully modified ordinary least squares (FMOLS) and PDOLS techniques are used and panel Granger causality test is used to examine the direction of the causality. Findings The Westerlund (2006) panel co-integration test confirms the existence of the long-run relationship between financial development and economic growth for SAARC countries. The coefficients of FMOLS and DOLS indicate that index of financial development (IFD) and trade openness supports economic growth in SAARC region. In the short-run, there is unidirectional causality running from IFD to economic growth. Research limitations/implications In the view of these findings it is recommended that countries in the region should adopt policies geared toward financial sector development to attain high economic growth. Originality/value To the best of the author’s knowledge, no studies have looked into SAARC countries to study the relationship between financial development and economic growth, this study is the first of its kind.

Remittances, Economic Growth and Poverty: A Case of African OIC Member Countries

2018 ◽  
Vol 57 (2) ◽  
pp. 121-143
Author(s):  
Nasim Shah Shirazi ◽  
Sajid Amin Javed ◽  
Dawood Ashraf
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Poverty Reduction ◽  
Simultaneous Equation ◽  
Equation Model ◽  
Annual Data ◽  
Simultaneous Equation Model ◽  
African Countries ◽  
Alternative Source ◽  
The Impact

This paper investigates the impact of remittance inflows on economic growth and poverty reduction for seven African countries using annual data from 1992-2010. By using the depth of hunger as a proxy for poverty in a Simultaneous Equation Model (SEM), we find that remittances have statistically significant growth enhancing and poverty reducing impact. Drawing on our estimates, we conclude that financial development level significantly increases the remittances inflows and strengthens poverty alleviating impact of remittances. Results of our study further show a signficant interactive imapct of remittances and finacial develpment on economic growth, suggesting the substitutability between remittance inflows and financial development. We further find that 3 percentage point increase in credit provision to the private sector (financial development) can help eliminate the severe depth of hunger in the region. Remittances, serving an alternative source of private credit, can be effective in this regard. Keywords: Remittance Inflow, Poverty Alleviation, Financial Development, Simultaneous Equation Model

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

2017 ◽  
Vol 16 (1) ◽  
pp. 54-84 ◽  
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.

scholarly journals The Finance Growth Link: Comparative Analysis Of Two Eastern African Countries

2016 ◽  
Vol 19 (3) ◽  
pp. 147-167 ◽  
Author(s):  
Ashenafi Beyene Fanta ◽  
Daniel Makina
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Financial Development ◽  
Low Income ◽  
Structural Breaks ◽  
Response Analysis ◽  
African Countries ◽  
Vector Autoregressive ◽  
Stock Market Development ◽  
Sub Saharan

This paper examines the finance growth link of two low-income Sub-Saharan African economies – Ethiopia and Kenya – which have different financial systems but are located in the same region. Unlike previous studies, we account for the role of non-bank financial intermediaries and formally model the effect of structural breaks caused by policy and market-induced economic events. We used the Vector Autoregressive model (VAR), conducted impulse response analysis and examined variance decomposition. We find that neither the level of financial intermediary development nor the level of stock market development explains economic growth in Kenya. For Ethiopia, which has no stock market, intermediary development is found to be driven by economic growth. Three important inferences can be made from these findings. First, the often reported positive link between finance and growth might be caused by the aggregation of countries at different stages of economic growth and financial development. Second, country-specific economic situations  and episodes are important in studying the relationship between financial development and economic growth. Third, there is the possibility that the econometric model employed to test the finance growth link plays a role in the empirical result, as we note that prior studies did not introduce control variables.

Sign in / Sign up

Export Citation Format

Share Document