This study investigates empirically the role of financial deepening in economic growth in three middle-eastern countries (Saudi Arabia, Turkey, and the United Arab Emirates). Unlike many previous studies, I focus on the causal link between several alternative theoretical hypotheses. To that end, I use multivariate Granger-causality tests within an error-correction framework. The results generally support the view that financial deepening is a necessary causal factor of economic growth, although the strength of the evidence varies across countries and across the proxies used to measure financial deepening. The causal relationships are also predominately long-term in nature. Therefore, government policies aimed at promoting financial deepening in these countries must be persistent and sustainable in order to foster economic development. [E44, O11, O16].
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Volume (Year): 13 (1999) Issue (Month): 3 (October) Pages: 19-35 Download reference. The following formats are available: HTML
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