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Financial Developent and Economic Growth Nexus: Time Series Evidence from Middle Eastern and North African Countries

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Author Info
abu-bader, suleiman
abu-qarn, aamer

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Abstract

This paper examines the causal relationship between financial development and economic growth in five Middle Eastern and North African (MENA) countries for different periods ranging from 1960 to 2004, within a trivariate vector autoregressive (VAR) framework. We employ four different measures of financial development and apply Granger causality tests using the cointegration and vector error-correction (VEC) methodology. Our empirical results show weak support for a long-run relationship between financial development and economic growth, and for the hypothesis that finance leads growth. In cases where cointegration was detected, Granger causality was either bidirectional or it ran from output to financial development.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 972.

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Date of creation: 2006
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Handle: RePEc:pra:mprapa:972

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Related research
Keywords: Financial development Economic growth MENA Granger causality Error-correction models Cointegration

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Find related papers by JEL classification:
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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