Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial Development and Poverty Reduction Nexus:A Cointegration and Causality Analysis in Bangladesh

Contents:

Author Info

  • Uddin, Gazi Salah
  • Shahbaz, Muhammad
  • AROURI, Mohamed El Hedi

Abstract

This study investigates the relationship between financial development, economic growth and poverty reduction in Bangladesh using quarter frequency data over the period of 1975-2011. This issue is of importance for developing economics, since the role of financial sector in mobilizing and allocating savings into productive investments. All variables are tested for their order of integration using the ADF and Zivot-Andrews structural break tests. The results show that the variables are integrated at I(1). We then apply a simulation based the ARDL approach to cointegration by incorporating structural breaks stemming in the series for long run relation. Our empirical findings indicated that long run relationship between financial development, economic growth and poverty reduction exists in Bangladesh. The diagnostic tests show that the underlying assumptions of the statistical model are fulfilled. The implication of the empirical findings is explained in the main text.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/49264/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49264.

as in new window
Length:
Date of creation: 19 Aug 2013
Date of revision: 23 Aug 2013
Handle: RePEc:pra:mprapa:49264

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Financial development; economic growth; poverty;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Jan.
  2. Christopher F. Baum, 2003. "A review of Stata 8.1 and its time series capabilities," Boston College Working Papers in Economics, Boston College Department of Economics 581, Boston College Department of Economics.
  3. International Monetary Fund, 1997. "Sierra Leone," IMF Staff Country Reports 97/47, International Monetary Fund.
  4. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics, Boston College Department of Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  5. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  6. Patrick Honohan & Thorsten Beck, 2007. "Making Finance Work for Africa," World Bank Publications, The World Bank, number 6626, August.
  7. Uddin, Gazi Salah & Sjö, Bo & Shahbaz, Muhammad, 2013. "The Causal Nexus between Financial Development and Economic Growth in Kenya," MPRA Paper 49262, University Library of Munich, Germany, revised 23 Aug 2013.
  8. Nicholas M. Odhiambo, 2010. "Is financial development a spur to poverty reduction? Kenya's experience," Journal of Economic Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 37(3), pages 343-353, September.
  9. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2007. "Finance, inequality and the poor," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125426, Tilburg University.
  10. Muhammad Shahbaz & Faridul Islam, 2011. "Financial Development And Income Inequality In Pakistan: An Application Of Ardl Approach," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, Chung-Ang Unviersity, Department of Economics, vol. 36(1), pages 35-58, March.
  11. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Nov.
  12. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 813-36, July.
  13. Kangni KPODAR & Sylviane GUILLAUMONT JEANNENEY, 2006. "Financial Development, Financial Instability and Poverty," Working Papers 200607, CERDI.
  14. Qazi Muhammad Adnan Hye & Faridul Islam, 2013. "Does financial development hamper economic growth: empirical evidence from Bangladesh," Journal of Business Economics and Management, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(3), pages 558-582, June.
  15. Shaohua Chen & Martin Ravallion, 2004. "How Have the World's Poorest Fared since the Early 1980s?," World Bank Research Observer, World Bank Group, World Bank Group, vol. 19(2), pages 141-169.
  16. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, Elsevier, vol. 54(1-3), pages 159-178.
  17. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Dec.
  18. Shenggen Fan & Peter Hazell & Sukhadeo Thorat, 2000. "Government Spending, Growth and Poverty in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 82(4), pages 1038-1051.
  19. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(2), pages 274-98, April.
  20. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Mar.
  21. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2004. "Finance, Inequality, and Poverty: Cross-Country Evidence," NBER Working Papers 10979, National Bureau of Economic Research, Inc.
  22. Quartey, Peter, 2005. "Financial Sector Development, Savings Mobilization and Poverty Reduction in Ghana," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) RP2005/71, World Institute for Development Economic Research (UNU-WIDER).
  23. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  24. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 393-410, June.
  25. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  26. Philip Arestis & Asena Caner, 2009. "Financial liberalization and the geography of poverty," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, Cambridge Political Economy Society, vol. 2(2), pages 229-244.
  27. Nicholas M. Odhiambo, 2010. "Financial deepening and poverty reduction in Zambia: an empirical investigation," International Journal of Social Economics, Emerald Group Publishing, vol. 37(1), pages 41-53, January.
  28. 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.
  29. Helmut Lütkepohl, 2006. "Structural vector autoregressive analysis for cointegrated variables," AStA Advances in Statistical Analysis, Springer, Springer, vol. 90(1), pages 75-88, March.
  30. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Sep.
  31. Philip Arestis & Asena Caner, 2004. "Financial Liberalization and Poverty: Channels of Influence," Economics Working Paper Archive wp_411, Levy Economics Institute.
  32. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue May.
  33. Odhiambo, Nicholas M., 2009. "Finance-growth-poverty nexus in South Africa: A dynamic causality linkage," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 38(2), pages 320-325, March.
  34. Ravallion, Martin & Datt, Gaurav, 2002. "Why has economic growth been more pro-poor in some states of India than others?," Journal of Development Economics, Elsevier, Elsevier, vol. 68(2), pages 381-400, August.
  35. Takeshi Inoue & Shigeyuki Hamori, 2012. "How has financial deepening affected poverty reduction in India? Empirical analysis using state-level panel data," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 22(5), pages 395-408, March.
  36. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 1057-72, June.
  37. Hossein Jalilian & Colin Kirkpatrick, 2005. "Does Financial Development Contribute to Poverty Reduction?," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 636-656.
  38. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, Elsevier, vol. 29(6), pages 2325-2339.
  39. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
  40. Salvador Perez-Moreno, 2011. "Financial development and poverty in developing countries: a causal analysis," Empirical Economics, Springer, Springer, vol. 41(1), pages 57-80, August.
  41. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(3), pages 251-70, July.
  42. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
  43. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, Econometric Society, vol. 37(3), pages 424-38, July.
  44. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Aug.
  45. Gazi Salah Uddin & Phouphet Kyophilavong & Nasim Sydee, 2012. "The Casual Nexus of Banking Sector Development and Poverty Reduction in Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 304-311.
  46. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Jun.
  47. Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, Elsevier, vol. 28(6), pages 1075-1086, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Frederic Teulon, 2014. "Robert Solow, à la recherche des causes de croissance," Working Papers 2014-554, Department of Research, Ipag Business School.
  2. Anis Omri & Amel Sassi-Tmar, 2014. "Linking FDI inflows to economic growth in North African countries," Working Papers 2014-558, Department of Research, Ipag Business School.
  3. Anis Omri & Bassem kahouli, 2014. "The nexus between foreign investment, domestic capital and economic growth: Empirical evidence from the MENA region," Working Papers 2014-557, Department of Research, Ipag Business School.
  4. Chaker Aloui & Besma Hkiri & Duc Khuong Nguyen & Hela Ben Hamida, 2014. "Real growth co-movements among the GCC+2 countries: Evidence from timefrequency analysis," Working Papers 2014-568, Department of Research, Ipag Business School.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49264. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.