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Financial Development and Growth: A Re-Examination using a Panel Granger Causality Test

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Author Info

  • Christophe Hurlin

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

  • Baptiste Venet

    (Leda - Laboratoire d'Economie de Dauphine - Université Paris Dauphine - Paris IX)

Abstract

In this paper we investigate the causal relationship between financial development and economic growth. We use an innovative econometric method which is based on a panel test of the Granger non causality hypothesis. We implement various tests with a sample of 63 industrial and developing countries over the 1960-1995 and 1960-2000 periods. We use three standard indicators of financial development. The results provide support for a robust causality relationship from economic growth to the financial development. On the contrary, the non causality hypothesis from financial development indicators to economic growth can not be rejected in most of the cases. However, these results only imply that, if such a relationship exists, it can not be easily identified in a simply bi-variate Granger causality test.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00319995.

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Date of creation: Sep 2008
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Handle: RePEc:hal:wpaper:halshs-00319995

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Related research

Keywords: Granger Causality Tests; Panel Data; Financial Development; Economic Growth;

References

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  1. Christophe Hurlin, 2005. "Un test simple de l'hypothèse de non-causalité dans un modèle de panel hétérogène," Revue économique, Presses de Sciences-Po, Presses de Sciences-Po, vol. 56(3), pages 799-809.
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Citations

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Cited by:
  1. Ricardo Bebczuk & Tamara Burdisso & Jorge Carrera & Máximo Sangiácomo, 2011. "A New Look into Credit Procyclicality: International Panel Evidence," BCRA Working Paper Series 201155, Central Bank of Argentina, Economic Research Department.
  2. Tani, Massimiliano & Joyeux, Roselyne, 2013. "Do Business Visits Cause Productivity Growth?," IZA Discussion Papers 7827, Institute for the Study of Labor (IZA).
  3. Nabi, Mahmoud Sami & Suliman, Mohamed Osman, 2008. "The Institutional Environment and the Banking - Growth Nexus: Theory and Investigation for MENA," MPRA Paper 11854, University Library of Munich, Germany.
  4. Marc Raffinot & Baptiste Venet, 2013. "Low Income Countries, Credit Rationing and Debt Relief: Bye bye international financial market?," Working Papers, DIAL (Développement, Institutions et Mondialisation) DT/2013/03, DIAL (Développement, Institutions et Mondialisation).
  5. Venet, Baptiste & Peltrault, Frédéric, 2005. "Intra-industry trade and economic distance : causality tests using panel data," Economics Papers from University Paris Dauphine 123456789/122, Paris Dauphine University.
  6. Ilir MITEZA, 2012. "Fiscal Deficits, Current Deficits and Investment: A Panel Causality Framework of 20 OECD countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 12(1).
  7. Jochen Hartwig, 2008. "Has health capital formation cured ‘Baumol’s Disease’? – Panel Granger causality evidence for OECD countries," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 08-206, KOF Swiss Economic Institute, ETH Zurich.
  8. Cândida Ferreira, 2012. "Bank market concentration and efficiency in the European Union: a panel granger causality approach," Working Papers Department of Economics, ISEG - School of Economics and Management, Department of Economics, University of Lisbon 2012/03, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  9. Cândida Ferreira, 2013. "Bank market concentration and bank efficiency in the European Union: a panel Granger causality approach," International Economics and Economic Policy, Springer, Springer, vol. 10(3), pages 365-391, September.
  10. Marcelo P. Dabós & Ernesto Gantman, 2010. "The Fading Link? A New Empirical Analysis of the Relationship Between Financial Development and Economic Growth," Working Papers, Becker Friedman Institute for Research In Economics 2010-013, Becker Friedman Institute for Research In Economics.
  11. Gunther Schnabl & Stephan Freitag, 2012. "Reverse Causality in Global and Intra-European Imbalances," Review of International Economics, Wiley Blackwell, vol. 20(4), pages 674-690, 09.
  12. Cândida Ferreira, 2013. "Bank performance and economic growth: evidence from Granger panel causality estimations," Working Papers Department of Economics, ISEG - School of Economics and Management, Department of Economics, University of Lisbon 2013/21, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  13. Danny Cassimon & Marin Ferry & Marc Raffinot & Bjorn Van Campenhout, 2013. "Dynamic fiscal impact of the debt relief initiatives on african heavily indebted poor countries (HIPCs)," Working Papers, DIAL (Développement, Institutions et Mondialisation) DT/2013/01, DIAL (Développement, Institutions et Mondialisation).
  14. Alimi, R. Santos, 2014. "DOLS Cointegration Vector Estimation of the Effect of Inflation and Financial Deepening on Output Growth in Nigeria," MPRA Paper 57182, University Library of Munich, Germany.
  15. Schnabl, Gunther & Freitag, Stephan, 2010. "Reverse causality in global current accounts," Working Paper Series, European Central Bank 1208, European Central Bank.
  16. I-Chun Tsai & Chien-Wen Peng, 2012. "A panel data analysis for housing affordability in Taiwan," Journal of Economics and Finance, Springer, Springer, vol. 36(2), pages 335-350, April.
  17. Gunther Schnabl & Stephan Freitag, 2012. "Determinants of Global and Intra-European Imbalances," Global Financial Markets Working Paper Series 25-2011, Friedrich-Schiller-University Jena.
  18. Sahoo, Pravakar & Dash, Ranjan Kumar, 2013. "Financial sector development and domestic savings in South Asia," Economic Modelling, Elsevier, Elsevier, vol. 33(C), pages 388-397.
  19. Baraldi, Anna Laura & Cantabene, Claudia & Perani, Giulio, 2013. "Reverse causality in the R&D – patents relationship: an interpretation of the innovation persistence," MPRA Paper 47684, University Library of Munich, Germany.
  20. Judith A. Clarke & Nilanjana Roy & Weichun Chen, 2012. "Health and Wealth: Short Panel Granger Causality Tests for Developing Countries," Econometrics Working Papers, Department of Economics, University of Victoria 1204, Department of Economics, University of Victoria.

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