IDEAS home Printed from https://ideas.repec.org/p/sek/iacpro/9912044.html
   My bibliography  Save this paper

An Analysis Of The Relationship Between Financial Development And Economic Growth: G-7 Countries

Author

Listed:
  • ABIGAIL STIGLINGH

    (NORTH-WEST UNIVERSITY)

Abstract

A dire concern for many nations has always been their patterns of economic growth and financial development throughout the years. Tentatively, a relationship between the concepts co-exists. However, the direction of causality is of great interest, particularly in relation to the country?s level of development and growth. This paper studies the existence of a relationship between financial development and economic growth using a sample of G-7 countries for the period of 1996 to 2013. Making use of panel data models such as panel unit root test, Johansen-Fisher cointegration and vector error correction model/granger causality and using secondary time series data obtained from the World Bank and the International Monetary Fund (IMF) for G-7 countries (Canada, France, Germany, Great Britain, Italy, Japan and United States). Variables used include, economic growth, stock market capitalisation, total investment growth, interest rates and population growth. Findings of the study indicated that real interest rates and total investment is positively related to economic growth in G-7; while other variables such as stock market size, do play a significant role in explaining economic growth in G-7 countries. This study may assist G-7 countries to improve their economic growth structure and financial development systems over time.

Suggested Citation

  • Abigail Stiglingh, 2019. "An Analysis Of The Relationship Between Financial Development And Economic Growth: G-7 Countries," Proceedings of International Academic Conferences 9912044, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:9912044
    as

    Download full text from publisher

    File URL: https://iises.net/proceedings/international-academic-conference-barcelona/table-of-content/detail?cid=99&iid=060&rid=12044
    File Function: First version, 2019
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Wurgler, Jeffrey, 2000. "Financial markets and the allocation of capital," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 187-214.
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    5. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 393-414.
    6. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    7. 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.
    8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    9. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633.
    10. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 8-35, January.
    11. Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-152, May.
    12. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
    13. Antonios Adamopoulos, 2010. "Financial development and economic growth. An empirical analysis for Ireland," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 3(1), pages 75-88, July.
    14. Ross Levine, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
    15. Badi H. Baltagi & James M. Griffin & Weiwen Xiong, 2000. "To Pool Or Not To Pool: Homogeneous Versus Hetergeneous Estimations Applied to Cigarette Demand," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 117-126, February.
    16. Pasquale Tridico, 2010. "Growth, Inequality and Poverty in Emerging and Transition Economies," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(4), pages 979-1001, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. James B. Ang, 2008. "A Survey Of Recent Developments In The Literature Of Finance And Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 536-576, July.
    2. Peter Ego Ayunku, 2018. "The Nexus between Financial Sector Development and Economic Growth in Nigeria: A Cointergration Approach," Noble International Journal of Social Sciences Research, Noble Academic Publsiher, vol. 3(8), pages 55-70, August.
    3. Clement Olalekan Olaniyi & Sunday Idowu Oladeji, 2021. "Moderating the effect of institutional quality on the finance–growth nexus: insights from West African countries," Economic Change and Restructuring, Springer, vol. 54(1), pages 43-74, February.
    4. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    5. Siddiki, Jalal Uddin & Auerbach, Paul, 2000. "Economic development, finance and liberalisation: a survey and some unresolved issues," Economics Discussion Papers 2000-6, School of Economics, Kingston University London.
    6. Alessandro Giovannini & Maurizio Iacopetta & Raoul Minetti, 2013. "Financial Markets, Banks, and Growth : Disentangling the links," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 105-147.
    7. Weshah Razzak & El Mostafa Bentour, 2020. "The Transitional Dynamic of Finance Led Growth," Discussion Papers 2001, School of Economics and Finance, Massey University, New Zealand.
    8. Muhammad Arshad Khan, 2007. "Foreign Direct Investment and Economic Growth: The Role of Domestic Financial Sector," PIDE-Working Papers 2007:18, Pakistan Institute of Development Economics.
    9. Stati Statev, 2009. "The Interaction between the Banking System and the Real Economy (Part One: Theory and Methodology)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 38-66.
    10. Abdulkadir Rafindadi & Zarinah Yusof, 2015. "Do the dynamics of financial development spur economic growth in Nigeria’s contemporal growth struggle? A fact beyond the figures," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 365-384, January.
    11. Stati Statev, 2009. "The Interaction between the Banking System and the Real Economy (Part One: Theory and Methodology)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 3-28.
    12. Audi, Marc & Ali, Amjad & Fayad Hamadeh, Hani, 2022. "Nexus among innovations, financial development and economic growth in developing countries," MPRA Paper 115220, University Library of Munich, Germany.
    13. Trunin, Pavel (Трунин, Павел), 2015. "Analysis of the Level of Development of the Financial System in the Russian Federation [Анализ Уровня Развития Финансовой Системы В Российской Федерации]," Published Papers mn38, Russian Presidential Academy of National Economy and Public Administration.
    14. Onur ÖZDEMİR, 2020. "Revisiting the Finance-Growth Nexus in Turkey: Bayer-Hanck Combined Cointegration Approach over the 1970-2016 Period," Sosyoekonomi Journal, Sosyoekonomi Society, issue 28(44).
    15. Amendola Nicola & Carbonari Lorenzo & Ferraris Leo, 2020. "Collateral and development," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(1), pages 1-17, January.
    16. Rosa Capolupo, 2018. "Finance, Investment and Growth: Evidence for Italy," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 47(1), pages 145-186, February.
    17. repec:hal:spmain:info:hdl:2441/6o65lgig8d0qcro9p14jk1001 is not listed on IDEAS
    18. Rosa Capolupo & Giuseppe Celi, 2004. "Il finanziamento dello sviluppo: Teorie ed evidenza empirica," SERIES 0009, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Sep 2004.
    19. Ekundayo Peter Mesagan & Xuan Vinh Vo & Precious Muhammed Emmanuel, 2023. "The technological role in the growth-enhancing financial development: evidence from African nations," Economic Change and Restructuring, Springer, vol. 56(1), pages 657-680, February.
    20. Kar Muhsin & Peker Osman & Kaplan Muhittin, 2008. "Trade Liberalization, Financial Development and Economic Growth in The Long Term: The Case of Turkey," South East European Journal of Economics and Business, Sciendo, vol. 3(2), pages 25-38, November.
    21. Laurent Cavenaile & Christian Gengenbach & Franz Palm, 2014. "Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis," De Economist, Springer, vol. 162(1), pages 19-40, March.

    More about this item

    Keywords

    Financial development; economic growth; panel data; developed countries; G-7;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E00 - Macroeconomics and Monetary Economics - - General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sek:iacpro:9912044. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klara Cermakova (email available below). General contact details of provider: https://iises.net/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.