Does financial development precede growth? Robinson and Lucas might be right
AbstractThis paper studies whether there is any causal link between financial development indicators and economic growth, using Sims-Geweke causality tests performed in the large panel data set provided by Levine, Loayza and Beck. In sharp contrast to their findings, no evidence was found of any positive unidirectional causal link from financial development indicators to economic growth. On the contrary, a substantial indication that economic growth precedes subsequent financial development was found. As argued by Robinson, financial development might primarily follow economic growth, as a result of increased demand for financial services. Although the present result does not quite imply that the role of financial development in the development process is not important, the bottom line is that a more balanced approach to studying the relationship between growth and finance needs to be adopted. As termed by Lucas, the importance of financial development in economic growth might be very badly 'over-stressed'. Robinson and Lucas might be right.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Economics Letters.
Volume (Year): 14 (2007)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.tandf.co.uk/journals/routledge/13504851.html
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blomström, Magnus & Lipsey, Robert E & Zejan, Mario, 1993.
"Is Fixed Investment the Key to Economic Growth?,"
CEPR Discussion Papers
870, C.E.P.R. Discussion Papers.
- Beck, T.H.L. & Levine, R. & Loayza, N., 2000.
"Financial intermediation and growth: Causality and causes,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-3125519, Tilburg University.
- Levine, Ross & Loayza, Norman & Beck, Thorsten, 2000. "Financial intermediation and growth: Causality and causes," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 31-77, August.
- Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
- Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
- Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
- Emilia Mazur & W. Robert & J. Alexander, 2001. "Financial sector development and economic growth in New Zealand," Applied Economics Letters, Taylor and Francis Journals, vol. 8(8), pages 545-549.
- Tsangyao Chang, 2002. "Financial development and economic growth in Mainland China: a note on testing demand-following or supply-leading hypothesis," Applied Economics Letters, Taylor and Francis Journals, vol. 9(13), pages 869-873.
- Marques, Luís Miguel & Fuinhas, José Alberto & Marques, António Cardoso, 2013. "Does the stock market cause economic growth? Portuguese evidence of economic regime change," Economic Modelling, Elsevier, vol. 32(C), pages 316-324.
- Verhoef, Grietjie & Greyling, Lorraine & Mwamba, John, 2013. "SAVINGS and economic growth: a historical analysis of the relationship between savings and economic growth in the CAPE Colony economy, 1850-1909," MPRA Paper 47819, University Library of Munich, Germany, revised 19 Jun 2013.
- Gurgul, Henryk & Łukasz, Lach, 2011.
"Financial development and economic growth in Poland in transition: causality analysis,"
38034, University Library of Munich, Germany.
- Henryk Gurgul & £ukasz Lach, 2012. "Financial Development and Economic Growth in Poland in Transition: Causality Analysis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(4), pages 347-367, August.
- Marques, Luís Miguel & Fuinhas, José Alberto & Marques, António Cardoso, 2012.
"Interação entre o mercado acionista e o crescimento económico: Uma apreciação do caso português (1993-2010)
[Interaction between the stock market and economic growth: An assessment of the Por," MPRA Paper 39808, University Library of Munich, Germany.
- N M Odhiambo, 2008. "Financial Development in Kenya: a Dynamic Test of the Finance-led Growth Hypothesis," Economic Issues Journal Articles, Economic Issues, vol. 13(2), pages 21-36, September.
- Nicholas Odhiambo, 2010. "Finance-investment-growth nexus in South Africa: an ARDL-bounds testing procedure," Economic Change and Restructuring, Springer, vol. 43(3), pages 205-219, August.
- Claude Berthomieu & Anastasia Ri, 2009. "Process and Effects of Financial Liberalization in Transition Countries: A Selective Literature Survey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(4), pages 453-473, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.