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The Causal Nexus between Financial Development and Economic Growth in Kenya

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  • Uddin, Gazi Salah
  • Sjö, Bo
  • Shahbaz, Muhammad

Abstract

This paper aims to reexamine the relationship between financial development and economic growth in Kenya over the period of 1971-2011. Since, financial sector plays a vital role in mobilizing and allocating savings into productive ventures, the core issue of this investigation remains important for developing economics. The examination is based on a Cobb-Douglas production augmented by incorporating financial development. A simulation based ARDL bounds testing and Gregory and Hansen’s structural break cointegration approaches are being utilized in this study. Cointegration is being found between the series in the presence of a structural break in 1992. It is also being established that, in the long run, development of financial sector has positive impact on economic growth. Here remains an important policy implication for the concerned individuals of Kenya, that is, they may emphasize on financial development to ignite economic growth.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49262.

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Date of creation: 03 Aug 2013
Date of revision: 23 Aug 2013
Handle: RePEc:pra:mprapa:49262

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Keywords: Economic Growth; Financial Development; Kenya;

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References

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  1. Badi H. Baltagi & Panicos O. Demetriades & Siong Hook Law, 2008. "Financial Development and Openness: Evidence from Panel Data," Center for Policy Research Working Papers 107, Center for Policy Research, Maxwell School, Syracuse University.
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  22. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2008. "Financial development and economic growth: The Egyptian experience," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 887-898.
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Citations

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Cited by:
  1. Uddin, Gazi Salah & Shahbaz, Muhammad & Arouri, Mohamed & Teulon, Frédéric, 2014. "Financial development and poverty reduction nexus: A cointegration and causality analysis in Bangladesh," Economic Modelling, Elsevier, vol. 36(C), pages 405-412.
  2. Shahbaz, Muhammad & Ur Rehman, Ijaz, 2013. "Multivariate–Based Granger Causality between Financial Deepening and Poverty: The Case of Pakistan," MPRA Paper 50834, University Library of Munich, Germany, revised 20 Oct 2013.
  3. Kyophilavong, Phouphet & Salah Uddin, Gazi & Shahbaz, Muhammad, 2014. "The Nexus Between Financial Development and Economic Growth in Lao PDR," MPRA Paper 57308, University Library of Munich, Germany, revised 14 Jul 2014.

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