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The Impact of Shadow Banking on Economic Growth: Evidence from Cross Country Data (2006–2018)

Author

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  • Sheunesu Zhou

    (Department of Business Management, Faculty of Commerce, Administration and Law, University of Zululand, P Bag X1001, Kwadlangezwa, 3886, Richards Bay, South Africa)

  • D Tewari Dev

    (#x2020;Department of Economics, Faculty of Commerce, Administration and Law, University of Zululand, P Bag X1001, Kwadlangezwa, 3886, Richards Bay, South Africa)

Abstract

Shadow banking has become an important part of many financial systems despite having contributed to the financial crisis of 2008/2009. This study analyzes the relationship between shadow banking and economic growth using a panel of 28 developed and emerging economies. We employ panel feasible GLS technique and find a positive association between shadow banking and economic growth in the long-run. Further, we test for the Finance–Growth relationship using Granger causality tests and find a bi-directional relationship between shadow banking and economic growth. Stock market development and bank credit also have positive bi-directional relationships with economic growth. Our findings emphasize the role of financial innovation in enhancing economic performance given a stable regulatory environment. We suggest regular review of macro-prudential policy to carter for new financial activities and also to allow for development of new financing techniques.

Suggested Citation

  • Sheunesu Zhou & D Tewari Dev, 2020. "The Impact of Shadow Banking on Economic Growth: Evidence from Cross Country Data (2006–2018)," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 11(03), pages 1-19, October.
    • Handle: RePEc:wsi:jicepx:v:11:y:2020:i:03:n:s1793993320500106
    DOI: 10.1142/S1793993320500106
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    Cited by:

    1. jamshidi , neda & Vaez Barzani , Mohammad & Toghyani , Mahdi, 2021. "An Analysis about the Long Term Impact of Banks Securitization on Economic Growth," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 16(3), pages 283-304, September.

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