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Dynamic impact of financial development on economic growth: heterogeneous panel data analysis of island economies

Author

Listed:
  • Kazi Sohag
  • Abi Bibi Nabilah
  • Rawshan Ara Begum

Abstract

The purpose of this study is to find whether there is any significant impact, be it short run or long run, of financial development (FD) on economic growth from nine island economies. Despite the vast researches on the FD and economic growth nexus, little has been known from the perspective of island economies. Therefore, this study has attempted to analyse the dynamic relationship by incorporating both time series and cross-sectional data from the island economies over the period of 30 years (1980 to 2009). This study employed error correction-based pooled mean group (PMG), mean group (MG) and dynamic fixed effect (DFE) model for analysing dynamic heterogeneous panel data. Results from the PMG estimates demonstrate that financial development has a negative short run impact on economic growth. Whilst in the long run, there is a positive and a homogenous effect of financial development on growth across the island economy.

Suggested Citation

  • Kazi Sohag & Abi Bibi Nabilah & Rawshan Ara Begum, 2015. "Dynamic impact of financial development on economic growth: heterogeneous panel data analysis of island economies," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 8(1), pages 77-95.
    • Handle: RePEc:ids:ijepee:v:8:y:2015:i:1:p:77-95
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    Citations

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    Cited by:

    1. Tatjana Tambovceva & Jelena Titko, 2020. "Consumer perception of sharing economy: pilot survey in Latvia," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 13(1), pages 72-84.
    2. Armenia Androniceanu & Irina Georgescu, 2023. "The Impact of CO 2 Emissions and Energy Consumption on Economic Growth: A Panel Data Analysis," Energies, MDPI, vol. 16(3), pages 1-17, January.
    3. Rajesh Sharma & Pradeep Kautish & D. Suresh Kumar, 2021. "Assessing Dynamism of Crude Oil Demand in Middle-Income Countries of South Asia: A Panel Data Investigation," Global Business Review, International Management Institute, vol. 22(1), pages 169-183, February.
    4. Olufemi A. Aluko & Muazu Ibrahim, 2020. "Institutions and the financial development–economic growth nexus in sub‐Saharan Africa," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 49(3), September.

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