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

Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis

Contents:

Author Info

  • Laurent Cavenaile
  • Christian Gengenbach
  • Franz Palm

Abstract

The aim of this paper is to investigate the long run relationship between the development of banks and stock markets and economic growth. We make use of the Groen and Kleibergen (2003) panel cointegration methodology to test the number of cointegrating vectors among these three variables for 5 developing countries. In addition, we test the direction of potential causality between financial and economic development. Our results conclude to the existence of a single cointegrating vector between financial development and growth and of causality going from financial development to economic growth. We find little evidence of reverse causation as well as bi-directional causality.

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://www2.ulg.ac.be/crepp/papers/crepp-wp201102.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège in its series CREPP Working Papers with number 1102.

as in new window
Length:
Date of creation: 2011
Date of revision:
Handle: RePEc:rpp:wpaper:1102

Contact details of provider:
Postal: Boulevard du Rectorat, 7, Batiment 31, boite 39, 4000 Liege
Phone: + 32 (0) 4 366 31 08
Fax: + 32 (0) 4 366 31 06
Web page: http://www2.ulg.ac.be/crepp/
More information through EDIRC

Related research

Keywords:

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. Levine, Ross, 1991. " Stock Markets, Growth, and Tax Policy," Journal of Finance, American Finance Association, American Finance Association, vol. 46(4), pages 1445-65, September.
  2. Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0346, Faculty of Economics, University of Cambridge.
  3. Calderon, Cesar & Liu, Lin, 2003. "The direction of causality between financial development and economic growth," Journal of Development Economics, Elsevier, Elsevier, vol. 72(1), pages 321-334, October.
  4. Greenwood, J. & Jovanovic, B., 1988. "Financial Development, Growth, And The Distribution Of Income," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 131, University of Rochester - Center for Economic Research (RCER).
  5. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers, Centre for Economic Performance, LSE dp0007, Centre for Economic Performance, LSE.
  6. Chung-Hua Shen & Chien-Chiang Lee & Shyh-Wei Chen & Zixiong Xie, 2011. "Roles played by financial development in economic growth: application of the flexible regression model," Empirical Economics, Springer, Springer, vol. 41(1), pages 103-125, August.
  7. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  8. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  9. P. J. Dawson, 2003. "Financial development and growth in economies in transition," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 10(13), pages 833-836.
  10. Philip Arestis & Panicos O. Demetriades & Kul B. Luintel, 1997. "Financial Development and Economic Growth: the Role of Stock Markets," Keele Department of Economics Discussion Papers (1995-2001), Department of Economics, Keele University 97/05, Department of Economics, Keele University.
  11. Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 80(4), pages 638-646, November.
  12. Groen, Jan J J & Kleibergen, Frank, 2003. "Likelihood-Based Cointegration Analysis in Panels of Vector Error-Correction Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 21(2), pages 295-318, April.
  13. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 537-58, June.
  14. Michael Graff & Alexander Karmann, 2006. "What Determines the Finance-growth Nexus? Empirical Evidence for Threshold Models," Journal of Economics, Springer, Springer, vol. 87(2), pages 127-157, 03.
  15. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, Central Bank of Chile, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
  16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  17. Rousseau, P. L. & Wachtel, P., 2000. "Equity markets and growth: Cross-country evidence on timing and outcomes, 1980-1995," Journal of Banking & Finance, Elsevier, Elsevier, vol. 24(12), pages 1933-1957, December.
  18. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, Econometric Society, vol. 58(1), pages 113-44, January.
  19. Xu, Zhenhui, 2000. "Financial Development, Investment, and Economic Growth," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 38(2), pages 331-44, April.
  20. Greenwood, Jeremy & Smith, Bruce D., 1997. "Financial markets in development, and the development of financial markets," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 21(1), pages 145-181, January.
  21. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series, The World Bank 1083, The World Bank.
  22. Pablo Emilio Guidotti & Jose De Gregorio, 1992. "Financial Development and Economic Growth," IMF Working Papers, International Monetary Fund 92/101, International Monetary Fund.
  23. Bencivenga, Valerie R & Smith, Bruce D, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 195-209, April.
  24. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, Elsevier, vol. 51(2), pages 387-411, December.
  25. Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(3), pages 423-442, March.
  26. L. Deidda & B. Fattouh, 2001. "Non linearity between finance and growth," Working Paper CRENoS, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia 200104, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  27. Guglielmo Maria Caporale & Peter G. A Howells & Alaa M. Soliman, 2004. "Stock Market Development And Economic Growth: The Causal Linkage," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 33-50, June.
  28. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  29. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  30. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, Elsevier, vol. 115(1), pages 53-74, July.
  31. Rioja, Felix & Valev, Neven, 2004. "Does one size fit all?: a reexamination of the finance and growth relationship," Journal of Development Economics, Elsevier, Elsevier, vol. 74(2), pages 429-447, August.
  32. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(3), pages 401-19, June.
  33. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, Elsevier, vol. 37(2-3), pages 632-640, April.
  34. Berthelemy, Jean-Claude & Varoudakis, Aristomene, 1996. "Economic Growth, Convergence Clubs, and the Role of Financial Development," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 300-328, April.
  35. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 8(1-2), pages 8-35, January.
  36. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(2), pages 688-726, June.
  37. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 513-542, December.
  38. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  39. Luintel, Kul B. & Khan, Mosahid, 1999. "A quantitative reassessment of the finance-growth nexus: evidence from a multivariate VAR," Journal of Development Economics, Elsevier, Elsevier, vol. 60(2), pages 381-405, December.
  40. Toda, Hiro Y & Phillips, Peter C B, 1993. "Vector Autoregressions and Causality," Econometrica, Econometric Society, Econometric Society, vol. 61(6), pages 1367-93, November.
  41. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2004. "Financial development and economic growth: evidence from panel unit root and cointegration tests," Journal of Development Economics, Elsevier, Elsevier, vol. 73(1), pages 55-74, February.
  42. Neven Valev & Felix Rioja, 2002. "Finance and the Sources of Growth at Various Stages of Economic Development," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0217, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  43. Harris, Richard D. F., 1997. "Stock markets and development: A re-assessment," European Economic Review, Elsevier, Elsevier, vol. 41(1), pages 139-146, January.
  44. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  45. Nicholas Apergis & Ioannis Filippidis & Claire Economidou, 2007. "Financial Deepening and Economic Growth Linkages: A Panel Data Analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 143(1), pages 179-198, April.
  46. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
  47. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series, The World Bank 1083, The World Bank.
  48. Mosconi, Rocco & Giannini, Carlo, 1992. "Non-causality in Cointegrated Systems: Representation Estimation and Testing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 54(3), pages 399-417, August.
Full references (including those not matched with items on IDEAS)

Citations

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:rpp:wpaper:1102. 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: (Mathieu Lefebvre).

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.