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Financial development and economic growth: The case of eight Asian countries

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  • Sinha, Dipendra
  • Macri, Joseph

Abstract

This paper looks at the relationship between financial development and economic growth using time series data for eight Asian countries. First, we estimate augmented production functions where a financial development variable is added. Second, we conduct multivariate causality tests between the growth rate of income and the growth rates of the financial development variables. The regression results show a positive and significant relationship between the income variables and financial variables for India, Malaysia, Pakistan and Sri Lanka. The multivariate causality tests show a two-way causality relationship between the income and the financial variables for India and Malaysia, one-way causality from financial variables to income variables for Japan and Thailand and reverse causality for Korea, Pakistan and Philippines. Thus, our empirical results do not unambiguously support the general view of a clear and positive relationship between financial development and economic growth.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18297.

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Date of creation: 2001
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Publication status: Published in Economia Internazionale 2.54(2001): pp. 219-234
Handle: RePEc:pra:mprapa:18297

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Related research

Keywords: finanacial development; economic growth; Asian countries;

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References

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  1. 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. Law, Siong Hook & Azman-Saini, W.N.W. & Smith, Peter, 2006. "Finance and growth in a small open emerging market," MPRA Paper 715, University Library of Munich, Germany.
  2. Gurgul, Henryk & Lach, Łukasz, 2012. "Financial Development and Economic Growth in Poland in Transition: Causality Analysis," MPRA Paper 52303, University Library of Munich, Germany.
  3. Muhammad Arshad Khan & Abdul Qayyum, 2007. "Trade Liberalisation, Financial Development and Economic Growth," Trade Working Papers 22204, East Asian Bureau of Economic Research.
  4. Kar, Muhsin & NazlIoglu, Saban & AgIr, Hüseyin, 2011. "Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis," Economic Modelling, Elsevier, vol. 28(1-2), pages 685-693, January.

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