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Financial Development, International Trade and Economic Growth in Australia:New Evidence from Multivariate Framework Analysis

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  • Muhammad, Shahbaz
  • Mohammad, Mafizur Rahman
  • Abdul, Farooq

Abstract

This study investigates the relationship between financial development, international trade and economic growth in case of Australia over the period of 1965-2010. The ARDL bounds testing approach to cointegration was applied to examine the long run relationship among the series, while stationarity properties of the variables were tested by applying two structural break tests i.e. Zivot-Andrews (1992) and Clemente et al. (1998). Our empirical evidence confirmed the long run relationship among the variables. The results showed that financial development, international trade and capital are the drivers of economic growth both in short run as well as in long run. The feedback effect exists between international trade and economic growth. Financial development Granger causes economic growth validating supply-side hypothesis in case of Australia.

Suggested Citation

  • Muhammad, Shahbaz & Mohammad, Mafizur Rahman & Abdul, Farooq, 2012. "Financial Development, International Trade and Economic Growth in Australia:New Evidence from Multivariate Framework Analysis," MPRA Paper 42023, University Library of Munich, Germany, revised 17 Oct 2012.
    • Handle: RePEc:pra:mprapa:42023
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    1. Mikhail Stolbov, 2017. "Causality between credit depth and economic growth: evidence from 24 OECD countries," Empirical Economics, Springer, vol. 53(2), pages 493-524, September.

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    More about this item

    Keywords

    Financial Development; International Trade; Economic Growth; Australia;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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