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Finance-Growth Link In Oecd Countries: Evidence From Panel Causality And Cointegration Tests

Author

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  • Chrysost Bangake
  • Jude C Eggoh

Abstract

In this paper we employ recently developed panel causality and cointegration techniques to examine the long-run relationship between financial development and economic growth of 25 OECD countries. Three measures of financial deepening and stock markets are respectively used. Our results point out a bidirectional causality between financial development and economic growth and support the point of view that although both banking sector and stock market could be a driving force of economic growth, the effects of the former are more powerful. The banking sector is the main channel through which financial development can affect economic growth. Furthermore, the effect of economic growth on stock market indices is more important compared to banking sector indicators. These results have some policy implications.

Suggested Citation

  • Chrysost Bangake & Jude C Eggoh, 2010. "Finance-Growth Link In Oecd Countries: Evidence From Panel Causality And Cointegration Tests," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 53(3/4), pages 375-392.
    • Handle: RePEc:bxr:bxrceb:2013/81138
    Note: Special Issue "26th Symposium on Money, Banking and Finance" Guest Editors :Sébastien Galanti and Grégory Levieuge
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    Cited by:

    1. IWASAKI, Ichiro & ONO, Shigeki, 2023. "Economic Development and the Finance-Growth Nexus : A Meta-Analytic Approach," CEI Working Paper Series 2023-06, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Keywords

    Financial development; Economic growth; Panel causality; Panel cointegration;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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