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Determining the relationship between financial development and economic growth: An application of ARDL technique to Singapore

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  • Jailani, Mohamad Zaky
  • Masih, Mansur

Abstract

The relationship between financial development and economic growth has been subject to considerable debate in the literature of development and growth. While empirical studies often provide a direct relationship between financial development proxies and growth, much controversy remains about how these results should be interpreted. The study, therefore, attempts to unravel the causality direction of financial development and economic growth. We used an Autoregressive Distributed Lag (ARDL) method to assess the finance-growth relation taking Gross National Expenditure, Gross Fixed Capital Formation, exports, Foreign Direct Investments and Loans made to the Private Sector as financial development indicators for Singapore over the period from 1970 to 2013. Interestingly, we found that our financial development variables had no impact on economic growth.

Suggested Citation

  • Jailani, Mohamad Zaky & Masih, Mansur, 2015. "Determining the relationship between financial development and economic growth: An application of ARDL technique to Singapore," MPRA Paper 65847, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:65847
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    References listed on IDEAS

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    7. Masih, A. Mansur M. & Masih, Rumi, 2002. "Propagative causal price transmission among international stock markets: evidence from the pre- and postglobalization period," Global Finance Journal, Elsevier, vol. 13(1), pages 63-91.
    8. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
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    Cited by:

    1. Al-Abdul Razag Bashier, 2015. "Economic Growth and Financial Development in Jordan: An ARDL Bounds Testing Approach," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 4(5), pages 270-284.

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    More about this item

    Keywords

    Financial development; Economic growth; ARDL; Singapore;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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