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Revisiting the nexus of the financial development and economic development: new international evidence using a wavelet approach

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  • Hyunjoo Kim Karlsson

    (The Linnaeus University)

  • Kristofer Månsson

    (Jönköping International Business School, JIBS)

  • Scott Hacker

    (Jönköping International Business School, JIBS)

Abstract

This study investigates Granger causality and instantaneous causality between financial development and economic development for 76 economies of four different income levels. The main novelty of the study is that it fills a gap in existing studies on the relationship between financial development and economic development by employing wavelet analysis, which enables us to study the varying timescale relationships of the variables. Among the findings is that at the scale of 4–8 years, it is more common for financial development and economic development to support each other once a country achieves at least lower-middle-income status.

Suggested Citation

  • Hyunjoo Kim Karlsson & Kristofer Månsson & Scott Hacker, 2021. "Revisiting the nexus of the financial development and economic development: new international evidence using a wavelet approach," Empirical Economics, Springer, vol. 60(5), pages 2323-2350, May.
    • Handle: RePEc:spr:empeco:v:60:y:2021:i:5:d:10.1007_s00181-020-01885-5
    DOI: 10.1007/s00181-020-01885-5
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