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Finance-Growth Volatility Nexus: Evidence from Lebanon

Author

Listed:
  • Salah Abosedra

    (American University in the Emirates, UAE)

  • Bernard, Ben Sita

    (Lebanese American University, Lebanon)

Abstract

A generalized autoregressive conditional heteroskedasticity (GARCH) model incorporating shocks of financial deepening and growth variables in the variance equation of the other variable respectably is used to investigate whether there is a significant bi-directional spillover of shocks between the two variables in Lebanon. We find that even though there is a bidirectional Granger-causality between financial deepening and economic growth after 7 months, financial deepening Granger-causes economic growth after one month and exhibit stronger feedbacks in both shocks and conditional variance. We offer some policy suggestions specific to the desired strategy intervention in the Lebanese economy that are consistent with our empirical results.

Suggested Citation

  • Salah Abosedra & Bernard, Ben Sita, 2018. "Finance-Growth Volatility Nexus: Evidence from Lebanon," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(4), pages 466-477, April.
  • Handle: RePEc:asi:aeafrj:2018:p:466-477
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    References listed on IDEAS

    as
    1. Mr. Ayhan Kose & Mr. Eswar S Prasad & Mr. Marco Terrones, 2003. "Financial Integration and Macroeconomic Volatility," IMF Working Papers 2003/050, International Monetary Fund.
    2. Ben Bernanke & Mark Gertler, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 87-114.
    3. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    4. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July.
    5. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    Cited by:

    1. Tae Sik Rhee & Fusheng Zheng, 2019. "The Effects of Work-Family Enrichment on Job and Life Satisfaction of Korean Employees," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 138-144, August.
    2. Adeola Y. Oyebowale, 2020. "Determinants of Bank Lending in Nigeria," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(3), pages 378-398, September.

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    More about this item

    Keywords

    GARCH; Economic growth; Financial deepening; Granger-causality; Lebanon.;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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