scholarly journals The Relationship Between Financial Development and Economic Growth in The United Kingdom: A Granger Causality Approach

2021 ◽  
Vol 2 (1) ◽  
pp. 47-71
Author(s):  
Samuel Wesiah ◽  
Sixtus Cyprian Onyekwere
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Cointegration Test ◽  
Gdp Per Capita ◽  
Causality Test ◽  
Long Run ◽  
Per Capita ◽  
The Uk

This study aims to investigate the causal relationship between financial development and economic growth in the UK using quarterly data from 1963q1 to 2015q1. Three variables were used as proxies for financial sector development, namely, ratios of broad money supply to GDP, ratios of private sector credit to GDP and the ratios of stock market capitalization to GDP.  Economic growth was measured using real GDP per capita. In order to achieve stated aim, the study employed the Johansen Cointegration test and the Granger causality test within a vector error correction framework (VEC) to test for the existence (or not) of a long run relationship as well as the direction of causality between financial development and economic growth. The result from the Cointegration test indicates that there is a stable long run equilibrium relationship between financial development and economic growth in the UK. The Granger causality test presents evidence of a bidirectional causality. This suggests that financial development and economic growth are mutually causal, that is, causality runs from both side which is in line with the feedback hypothesis in the literature which argue that financial development and economic growth exhibits a two-way causal relationship. In terms of each individual variable, the study finds that while bank credit to the private sector and stock market capitalisation Granger cause GDP per capita, GDP per capita on the other hand, Granger causes broad money supply.

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.

Does any nexus between electricity consumption and economic growth exist? Evidence from Haryana using VAR model

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kamaljit Singh
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Renewable Energy Sources ◽  
Electricity Consumption ◽  
Granger Causality Test ◽  
Economic Downturn ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Per Capita

Purpose In the fast-changing technological environment, electricity is the essence of the world economy and a significant means for all the modern world’s possessions. The ongoing economic downturn focuses on energy’s role in the economy. This study aims to explore the nexuses between per capita electricity usage and per capita state gross domestic product (SGDP) in Haryana, India. Design/methodology/approach The statistics from 1989 to 2015 have been analyzed using Johansen cointegration, vector autoregression and paired Granger-causality test. Findings The Granger causality test results show that a long-run association is absent. A short-run unidirectional relationship runs from per capita SGDP to per capita electricity usage. Practical implications As a policy suggestion, the policymakers may encourage energy conservation measures and renewable energy sources to lead the country’s sustainable energy supply. Moreover, Haryana can increase its influence in this sector and enter rapidly in the growing markets worldwide by stimulating the production and adoption of digital solutions for energy efficiency. Originality/value To the best of the author’s awareness, this research is one of its nature regarding systematically analyzing electricity usage and economic growth relationship in Haryana.

scholarly journals Petroleum Consumption and Financial Development in Malaysia

2016 ◽  
Author(s):  
Jen-Eem Chen ◽  
Yan-Ling Tan ◽  
Chin-Yu Lee ◽  
Lim-Thye Goh
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Financial Sector ◽  
Causality Test ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run

This paper aims to contribute to the existing literature by examining the dynamic relationship among petroleum consumption, financial development, economic growth and energy price. The sample of this study is based on the Malaysian annual data from 1980 to 2010. The model specification was examined in the Autoregressive Distributed Lag (ARDL) framework and the results revealed the existence of a long-run equilibrium. The findings indicated that financial development and economic growth cause a demand for energy to escalate in the long run. The Toda-Yamamoto (TYDL) non Granger-causality test provides evidence that there is unidirectional Granger-causality running from financial development and economic growth to energy consumption in the long run. This suggests that Malaysia is not an energy-dependent country. Hence, the government could implement energy conservation policies to reduce the waste of energy use. Given that development in the financial sector, and economic growth increase petroleum consumption in Malaysia, the policies pertaining to energy consumption should incorporate the development of the financial sector and economic growth of country.   Keywords: Petroleum consumption, financial development, non-renewable energy, Autoregressive Distributed Lag (ARDL), Toda-Yamamoto (TYDL) non Granger-causality test

Relationships between Financial Development, Trade Openness, and Economic Growth

2015 ◽  
pp. 183-196
Author(s):  
Fahri Seker ◽  
Murat Cetin ◽  
Birol Topcu ◽  
Gamze Yıldız Seren
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Trade Openness ◽  
Granger Causality Test ◽  
Bounds Testing ◽  
Causality Test ◽  
Vector Error Correction ◽  
Long Run ◽  
Short Run

The aim of this chapter is to investigate the cointegration and causal relationship between financial development, trade openness, and economic growth in Turkey for the period of 1980-2012. To analyze the data, the bounds testing and Johansen-Juselius approaches to cointegration and Granger causality test based on vector error-correction model are employed. The cointegration tests suggest that there is a long-run relationship between the variables. The Granger causality test reveals long-run bidirectional causality between trade openness and economic growth. The findings also indicate unidirectional causality running from financial development to trade openness and economic growth in the long run as well as a bi-directional causality between financial development and economic growth in the short run. The results support supply-leading and trade-led growth hypotheses. Therefore, it can be suggested that Turkey can accelerate its economic growth by improving its financial systems and encouraging foreign trade.

scholarly journals The direction of possible causal relationship between financial development and economic growth in Namibia

2011 ◽  
Vol 4 (2) ◽  
pp. 351-366
Author(s):  
Abel N. Sindano ◽  
Esau Kaakunga
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Granger Causality ◽  
Financial Development ◽  
Industrial Development ◽  
Small And Medium Enterprises ◽  
Granger Causality Test ◽  
Causality Test ◽  
Long Run ◽  
Medium Enterprises

The study investigates the causal relationship between financial development and economic growth in Namibia. In order to test for the existence of long-run relationships between the variables, the study employs a cointegration and vector error correction model (VECM) technique. The Granger causality test was applied to the variables to test for the direction of causation between variables. The results show that there is a stable long-run relationship between financial development and economic growth. The Granger causality test indicates that the causality runs from economic growth to financial development. The results suggest that the real sector of the economy should be developed further in order to stimulate further development in the economy through policy interventions like industrial development to diversify the economic base, enhance the performance of small and medium enterprises, and improve the performance of the tourism sector, which has great potential for promoting growth.

scholarly journals TRADE OPENNESS AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM INDIA

2014 ◽  
Vol 16 (1) ◽  
pp. 188-205 ◽  
Author(s):  
Qazi Muhammad Adnan Hye ◽  
Wee-Yeap Lau
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Granger Causality ◽  
Trade Openness ◽  
Granger Causality Test ◽  
Causality Test ◽  
Long Run ◽  
Rolling Window ◽  
Short Run ◽  
The Impact

The main objective of this study is to develop first time trade openness index and use this index to examine the link between trade openness and economic growth in case of India. This study employs a new endogenous growth model for theoretical support, auto-regressive distributive lag model and rolling window regression method in order to determine long run and short run association between trade openness and economic growth. Further granger causality test is used to determine the long run and short run causal direction. The results reveal that human capital and physical capital are positively related to economic growth in the long run. On the other hand, trade openness index negatively impacts on economic growth in the long run. The new evidence is provided by the rolling window regression results i.e. the impact of trade openness index on economic growth is not stable throughout the sample. In the short run trade openness index is positively related to economic growth. The result of granger causality test confirms the validity of trade openness-led growth and human capital-led growth hypothesis in the short run and long run.

scholarly journals INVESTASI DAN PERTUMBUHAN EKONOMI SUMATERA BARAT

2018 ◽  
Author(s):  
Melti Roza Adry
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Cointegration Test ◽  
Growth Data ◽  
Causality Test ◽  
Result Show

The purpose of the research is to know and analysis causality betweeninvesment and economic growth in West Sumatera. We are using invesment andEconomic growth data from 1st quartal 2000 until 4thquartal 2010. We are usingunit root test, cointegration test and granger causality test. The result show thatinvestment and economoic growth have causality effect in West Sumatera.

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

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.

scholarly journals The Causality Relationship between Technological Development Indicators and Economic Growth: The Case of Turkey

2017 ◽  
Author(s):  
Neşe Algan ◽  
Müge Manga ◽  
Muammer Tekeoğlu
Keyword(s):  
Economic Growth ◽  
Technological Development ◽  
Granger Causality Test ◽  
Gdp Per Capita ◽  
High Tech ◽  
Causality Test ◽  
Development Indicators ◽  
Causality Relationship ◽  
Patent Applications ◽  
Per Capita

The improvements in technological development indicators play a driving role in the process of economic growth and industrialization. Especially, technological developments are vital for developing countries. This study investigates the relationship between the share of R & D expenditure in GDP, the number of patent applications and GDP per capita utilizing Granger causality test for the period of 1996 - 2015. According to Granger Causality test analysis results, it is concluded that short-term one-way causality from high-tech product exports and R & D spending to GDP per capita, and one-way causality relationship from GDP per capita to patent application numbers. In addition, long-term R & D expenditures and patent applications have resulted in a positive GDP per capita, while high-tech exports, contrary to anticipation, negatively affected.

The Relevance of the Tourism-Led Growth Hypothesis to Malaysia

2017 ◽  
pp. 188-202 ◽  
Author(s):  
Chor Foon Tang ◽  
Eu Chye Tan
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Developed Countries ◽  
Causality Test ◽  
Full Sample ◽  
Aggregated Data ◽  
Long Run ◽  
Short Run ◽  
Disaggregated Data

This paper explored whether the tourism-led growth (TLG) hypothesis is empirically relevant to Malaysia based upon both full sample and rolling sample analyses. Data from January 1995 to December 2010 have been utilised for the purpose. Instead of relying upon aggregated data of tourist arrivals, disaggregated data of arrivals from 12 major tourism markets are relied upon for more insightful and accurate findings. The empirical results suggest that there was cointegration between Malaysia's economic growth and tourist arrivals from these tourism markets. However, the results of the full sample Granger causality test indicate that only 2 out of 12 tourism markets contributed to economic growth in the short-run. The TLG hypothesis is only supported in the long run by tourist arrivals from 10 out of the 12 tourism markets. The rolling-based Granger causality test shows that it is also these 10 markets situated mostly in developed countries that could provide a stable support for the TLG hypothesis.

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