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Financial Sector Development and Sustainable Economic Growth in Regionally Co-Integrated Emerging Markets

In: Issues in Corporate Governance and Finance

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  • Ritab S. Al-Khouri

Abstract

This paper presents new evidence of the relationship between financial market development (banking sector) and economic growth for a set of seven Middle East and North African economies over the period 1965–2002. We find evidence that in six of the seven countries, banking-sector development Granger causes increases in economic growth. However, in three of those six countries, economic growth also Granger causes banking development. Our co-integration analysis reveals that there is a stable long-run equilibrium relationship between banking-sector development and economic growth for all our countries. However, based on vector error-correction models, there is limited evidence that banking-sector development boosts economic growth in the short run.

Suggested Citation

  • Ritab S. Al-Khouri, 2007. "Financial Sector Development and Sustainable Economic Growth in Regionally Co-Integrated Emerging Markets," Advances in Financial Economics, in: Issues in Corporate Governance and Finance, pages 345-360, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:afeczz:s1569-3732(07)12013-2
    DOI: 10.1016/S1569-3732(07)12013-2
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