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Financial Developent and Economic Growth Nexus: Time Series Evidence from Middle Eastern and North African Countries

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Author Info

  • Suleiman Abu-Bader

    ()
    (Department of Economics, Ben-Gurion University of the Negev)

  • Aamer Abu-Qarn

    ()
    (Department of Economics, Ben-Gurion University of the Negev)

Abstract

This paper examines the causal relationship between financial development and economic growth in five Middle Eastern and North African (MENA) countries for different periods ranging from 1960 to 2004, within a trivariate vector autoregressive (VAR) framework. We employ four different measures of financial development and apply Granger causality tests using the cointegration and vector error-correction (VEC) methodology. Our empirical results show weak support for a long-run relationship between financial development and economic growth, and for the hypothesis that finance leads growth. In cases where cointegration was detected, Granger causality was either bidirectional or it ran from output to financial development.

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File URL: http://www.econ.bgu.ac.il/papers/223.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 223.

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Length: 34 pages
Date of creation: Sep 2006
Date of revision:
Publication status: Published in Review of Development Economics as: Abu-Bader, S. and Abu-Qarn, A. S. (2008) “Financial Development and Economic Growth: Empirical Evidence from Six MENA Countries,” Review of Development Economics, 12(4), pages 803–817.
Handle: RePEc:bgu:wpaper:223

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Keywords: Financial development; Economic growth; MENA; Granger causality; Error-correction models; Cointegration;

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References

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  8. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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Cited by:
  1. Jean-pierre Allegret & Sana Azzabi, 2013. "Financial development, threshold effects and convergence in developing and emerging countries," Economics Bulletin, AccessEcon, vol. 33(3), pages 1899-1921.
  2. Selim Yildirim & Bilge Kagan Özdemir & Burhan Dogan, 2013. "Financial Development and Economic Growth Nexus in Emerging European Economies: New Evidence from Asymmetric Causality," International Journal of Economics and Financial Issues, Econjournals, vol. 3(3), pages 710-722.
  3. Evans, Olaniyi, 2013. "On the Causality between Domestic Credit Aggregates and Economic Growth in a Multivariate VAR Framework: Evidence from Nigeria," MPRA Paper 51731, University Library of Munich, Germany.
  4. Rajmund Mirdala, 2011. "Financial Integration And Economic Growth In The European Transition Economies," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 0(2), pages 116-137, December.
  5. Evans, Olaniyi, 2013. "Testing Finance-Led, Export-Led and Import-Led Growth Hypotheses on Four Sub-Saharan African Economies," MPRA Paper 52460, University Library of Munich, Germany.
  6. Mirdala, Rajmund, 2011. "Financial Deepening and Economic Growth in the European Transition Economies," MPRA Paper 33609, University Library of Munich, Germany.

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