scholarly journals The Causal Relationship between Financial Development and Investment: a Review of Related Empirical Literature

2018 ◽  
Vol 21 (2) ◽  
pp. 119-136 ◽  
Author(s):  
Brian Muyambiri ◽  
Nicholas M. Odhiambo
Keyword(s):  
Causal Relationship ◽  
Financial Development ◽  
Empirical Literature ◽  
Macroeconomic Variables ◽  
The Relationship

This article reviews the theoretical and empirical literature on the causal relationship between financial development and investment. Based on the literature considered, it can be concluded that there is little consensus to date on the direction of causality between financial development and investment. 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 bank‑based side of financial development, as compared to the market‑based side of financial development. Given the number of studies assessed, the causal relationship between financial development and investment appears to be inconclusive, at best. Moreover, the study shows that the relationship between these two macroeconomic variables seems to differ from country to country; it is dependent on the proxies used to measure the level of financial development, as well as the methodology employed.

scholarly journals The Impact of Financial Development on Investment: a Review of International Literature

2018 ◽  
Vol 9 (2) ◽  
pp. 167-192
Author(s):  
Brian Muyambiri ◽  
Nicholas M. Odhiambo
Keyword(s):  
Empirical Research ◽  
Financial Development ◽  
Empirical Literature ◽  
International Literature ◽  
Macroeconomic Variables ◽  
Development Indicators ◽  
Investment Determinants ◽  
Topical Analysis ◽  
The Impact ◽  
The Relationship

This article summarises the empirical literature on the impact of financial development on investment. It presents a topical analysis of empirical research that focuses mainly on the interaction between financial development and investment, determinants and measurement of both financial development and investment, and empirical findings on the relationship between the two variables under discussion. The study concludes that most of the research done on the relationship between financial development and investment is highly skewed towards assessing the relationship using mostly bank-based financial development indicators, as compared to the market-based financial development indicators. Given the number of studies assessed, the impact of financial development on investment appears to be inconclusive, at best. Moreover, the study shows that the relationship between these two macroeconomic variables seems to differ from country to country; it is dependent on the proxies used to measure the level of financial development, as well as the methodology employed.

scholarly journals The Impact of Financial Development on Investment: A Review of International Literature

2018 ◽  
Vol 9 (2) ◽  
pp. 167-192
Author(s):  
Brian Muyambiri ◽  
Nicholas M. Odhiambo
Keyword(s):  
Full Article ◽  
Empirical Research ◽  
Financial Development ◽  
Empirical Literature ◽  
International Literature ◽  
Macroeconomic Variables ◽  
Development Indicators ◽  
Investment Determinants ◽  
The Impact ◽  
The Relationship

[full article and abstract in English] This article summarises the empirical literature on the impact of financial development on investment. It presents a topical analysis of empirical research that focuses mainly on the interaction between financial development and investment, determinants and measurement of both financial development and investment, and empirical findings on the relationship between the two variables under discussion. The study concludes that most of the research done on the relationship between financial development and investment is highly skewed towards assessing the relationship using mostly bank-based financial development indicators, as compared to the market-based financial development indicators. Given the number of studies assessed, the impact of financial development on investment appears to be inconclusive, at best. Moreover, the study shows that the relationship between these two macroeconomic variables seems to differ from country to country; it is dependent on the proxies used to measure the level of financial development, as well as the methodology employed.

scholarly journals Savings Mobilization and Financial Development during the Multicurrency Regime Period in Zimbabwe

2017 ◽  
Vol 9 (3(J)) ◽  
pp. 152-162
Author(s):  
Kunofiwa Tsaurai
Keyword(s):  
Financial Development ◽  
Time Series Data ◽  
Empirical Literature ◽  
Series Data ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
The Subject ◽  
The Relationship

This paper seeks to investigate the relationship between savings and financial development in Zimbabwe using both autoregressive distributive lag (ARDL) and vector error correction model (VECM) approaches for comparison purposes with monthly time series data from January 2009 to August 2015. Four distinct hypotheses emerged from the literature and these are the savings-led financial development, financial development-led savings, feedback effect and the insignificant/no relationship hypothesis. The existence of diverging and contradicting views in empirical literature on the subject matter is evidence that the linkage between savings and financial development is still far from being concluded. Both F-Bounds and Johansen co-integration tests observed that there is a long run relationship between savings and financial development in Zimbabwe. What is even more unique about this study is that both ARDL and VECM noted the presence of a bi-directional causality relationship between savings and financial development in the short and long run in Zimbabwe. The implication of this study is that in order to increase economic growth, Zimbabwe authorities should increase savings mobilization efforts in order to boost financial development, which in turn attracts more savings inflow into the formal financial system.

scholarly journals Non-Linear Relationship between Financial Development, Economic Growth and Growth Volatility: Evidence from Nigeria

2018 ◽  
Author(s):  
Oro Ufuo Oro ◽  
Paul Alagidede
Keyword(s):  
Economic Growth ◽  
Linear Relationship ◽  
Financial Development ◽  
Financial Services ◽  
Policy Implications ◽  
Empirical Literature ◽  
Development Economic ◽  
Econometric Methods ◽  
Growth Volatility ◽  
The Relationship

The relationship between economic growth, growth volatility and financial sector development continues to attract attention in the theoretical and empirical literature. Over time, some studies hypothesize that finance has a causal linear relationship with growth. Recently several other authors contradict this claim and argue that the relationship that exists between finance and growth is nonlinear. We investigate these claims for Nigeria for the period between 1970 and 2015, using semi-parametric econometric methods, Hansen sample splitting techniques and threshold estimator. We observed no evidence of ‘Too much finance’ as claimed by many researchers in recent times. We show that the relationship between financial development and economic growth is U-shaped. This is equally true for the relationship between financial development and growth volatility. We also discuss policy implications of our findings and recommend financial innovations and decentralization of stock exchanges to boost access to financial services, in addition, improved regulation to enhance financial market efficiency.

scholarly journals Impact of Macroeconomic Variables on Stock Markets: Evidence from Emerging Markets

2015 ◽  
Vol 8 (1) ◽  
pp. 195 ◽  
Author(s):  
Mahmoud Ramadan Barakat ◽  
Sara H. Elgazzar ◽  
Khaled M. Hanafy
Keyword(s):  
Stock Market ◽  
Causal Relationship ◽  
Emerging Economies ◽  
Price Index ◽  
Consumer Price Index ◽  
Macroeconomic Factors ◽  
Macroeconomic Variables ◽  
Market Index ◽  
The Relationship ◽  
Shed Light

<p>The key objective of this study is to shed light on the relationship between the stock market and macroeconomic factors in two emerging economies (Egypt and Tunisia) for the period from January 1998 to January 2014. Results indicated that there is a causal relationship in Egypt between market index and consumer price index (CPI), exchange rate, money supply, and interest rate. The same goes for Tunisia except for CPI, which had no causal relationship with the market index. Results also revealed that the four macroeconomic are co-integrated with the stock market in both countries.</p>

Economic growth and market-based financial systems: a review

2015 ◽  
Vol 32 (2) ◽  
pp. 235-255 ◽  
Author(s):  
Sheilla Nyasha ◽  
N.M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Causal Relationship ◽  
Financial Development ◽  
Design Methodology ◽  
Data Sets ◽  
Financial Systems ◽  
Content Type ◽  
The Relationship ◽  
Country Specific

Purpose – This paper aims to survey the existing literature on the causal relationship between market-based financial development and economic growth – in both developed and developing countries, highlighting the theoretical and the empirical evidence. Design/methodology/approach – The paper divides financial development into bank-based and market-based financial development, and it closely reviews the international literature on the relationship between market-based financial development and economic growth. Findings – The direction of causality between market-based financial development and economic growth varies from one country to another, depending on various country-specific characteristics, data sets and the methodology used by the researcher. On balance, there is predominant support for the supply-leading response, where the development of the market-based financial sector is expected to precede the development of the real sector. Originality/value – This review differs fundamentally from previous reviews, in that it divides financial development into bank-based and market-based financial development, and it focuses closely on market-based financial development and economic growth. The majority of the previous studies on this subject failed to make such a distinction, thereby focusing mainly on the general causal relationship between the overall financial development and economic growth. To the best of the authors' knowledge, this may be the first review of its kind to survey the existing research in detail on the causal relationship between market-based financial development and economic growth, in both developed and developing countries.

The Relationship Between Financial Development, Innovation and Economic Growth

2019 ◽  
pp. 462-479
Author(s):  
Asuman Koc Yurtkur
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
System Development ◽  
Financial System ◽  
Empirical Literature ◽  
Development Economic ◽  
Development Indicators ◽  
Theoretical Approaches ◽  
The Subject ◽  
The Relationship

Along with the globalization process, the relationship between the existence of an advanced financial system, financial development and economic growth has become one of the most debated issues. The financial system, development and development indicators, which play an important role in the overall success levels of the economy, are among the topics to be considered due to this importance. In this study, financial development, economic growth, and theoretical approaches are discussed. Moreover, the fact that the subject is empirically presenting evidence requires examination of this situation with studies in the literature. The presence of the findings obtained empirically, in particular Turkey's economy has made it necessary to include a large empirical literature. The generally accepted financial development indicators, which provide comparability in terms of countries, are examined in terms of financial markets and financial institutions in terms of depth, access, stability and efficiency during the period 2005-2015.

scholarly journals Savings Mobilization and Financial Development during the Multicurrency Regime Period in Zimbabwe

2017 ◽  
Vol 9 (3) ◽  
pp. 152
Author(s):  
Kunofiwa Tsaurai
Keyword(s):  
Financial Development ◽  
Time Series Data ◽  
Empirical Literature ◽  
Series Data ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
The Subject ◽  
The Relationship

This paper seeks to investigate the relationship between savings and financial development in Zimbabwe using both autoregressive distributive lag (ARDL) and vector error correction model (VECM) approaches for comparison purposes with monthly time series data from January 2009 to August 2015. Four distinct hypotheses emerged from the literature and these are the savings-led financial development, financial development-led savings, feedback effect and the insignificant/no relationship hypothesis. The existence of diverging and contradicting views in empirical literature on the subject matter is evidence that the linkage between savings and financial development is still far from being concluded. Both F-Bounds and Johansen co-integration tests observed that there is a long run relationship between savings and financial development in Zimbabwe. What is even more unique about this study is that both ARDL and VECM noted the presence of a bi-directional causality relationship between savings and financial development in the short and long run in Zimbabwe. The implication of this study is that in order to increase economic growth, Zimbabwe authorities should increase savings mobilization efforts in order to boost financial development, which in turn attracts more savings inflow into the formal financial system.

scholarly journals Financial development and income inequality

2020 ◽  
Vol 7 (54) ◽  
pp. 84-100
Author(s):  
Ewa Weychert
Keyword(s):  
Income Inequality ◽  
Income Distribution ◽  
Financial Development ◽  
Added Value ◽  
Empirical Literature ◽  
Financial Variables ◽  
Short Run ◽  
Fixed Panel ◽  
The Impact ◽  
The Relationship

AbstractThis paper analyses the influence of financial development on income inequality. Throughout this work, one may find the overview of theoretical and empirical literature as well as the empirical model using fixed panel data method. This research paper tries to disentangle the opposing views on the relationship between finance and income distribution, by evaluating the impact of the different dimensions of financial development on the level of income inequality. The important added value of this research is the usage of quintiles of income distribution as a dependent variable that may help to recognise the effect of financial development on the poorest and richest. Another novelty of the paper is the consideration of the effects of financial variables on Gini coefficient in the long and short run. The main results of the analysis using dataset from 2003 to 2014 indicate that financial access decreases income inequality.

scholarly journals The Causal Relationship Between Government Revenue And Expenditure In Serbia

2014 ◽  
Vol 52 (2) ◽  
pp. 127-138 ◽  
Author(s):  
Stevan Luković ◽  
Milka Grbić
Keyword(s):  
Economic System ◽  
Causal Relationship ◽  
Government Expenditure ◽  
Empirical Literature ◽  
Fiscal Deficit ◽  
Government Revenue ◽  
Quarterly Data ◽  
Long Run ◽  
Significant Burden ◽  
The Relationship

Abstract This paper studies the causal relationship between government revenue and government expenditure in Serbia, using quarterly data for the 2003 (Q1) - 2012 (Q4) period. In addition to the theoretical arguments regarding this causality, extensive empirical literature is also available. The problem of the fiscal deficit has been a significant burden for the economic system of Serbia for a number of years. Therefore, the relationship between government revenue and government expenditure represents an important issue that should be studied empirically in order to draw certain conclusions. In this paper, the Toda-Yamamoto long-run non-causality method is used to determine whether the causal relationship between government revenue and government expenditure exists in Serbia. The application of this method confirms the existence of a unidirectional (one-way) causality running from government expenditure to government revenue, which means that government expenditure Granger-causes government revenue.

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