IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Finance–Growth Nexus: Empirical Evidence from South Africa

  • Ilhan Ozturk
Registered author(s):

    In this paper we investigate the long-run relationship between financial development and economic growth in South Africa for the period 1970-2003. The empirical investigation is carried out in a vector autoregression (VAR) framework based on the theory of cointegration and error-correction representation of cointegrated variables. The results of the cointegration analysis provide evidence of the existence of a long-run relationship between financial development and economic growth. The empirical findings in the paper show a two-way causality between financial development and economic growth.

    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:
    Download Restriction: Fee access

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Studies.

    Volume (Year): (2007)
    Issue (Month): 4 ()
    Pages: 3-17

    in new window

    Handle: RePEc:bas:econst:y:2007:i:4:p:3-17
    Contact details of provider: Postal: 3, Aksakov Str., 1040, Sofia
    Phone: (+359 2) 810 40 18
    Fax: (+359 2) 988 21 08
    Web page:

    More information through EDIRC

    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. Panicos O. Demetriades & Philip Arestis, 1996. "Financial Development and Economic Growth: Assessing the Evidence," Keele Department of Economics Discussion Papers (1995-2001) 96/16, Department of Economics, Keele University.
    2. repec:tpr:qjecon:v:108:y:1993:i:3:p:717-37 is not listed on IDEAS
    3. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
    4. Levine, Ross & Zervos, Sara, 1996. "Stock market development and long-run growth," Policy Research Working Paper Series 1582, The World Bank.
    5. Greenwood, J. & Jovanovic, B., 1988. "Financial Development, Growth, And The Distribution Of Income," RCER Working Papers 131, University of Rochester - Center for Economic Research (RCER).
    6. Levine, Ross, 1991. " Stock Markets, Growth, and Tax Policy," Journal of Finance, American Finance Association, vol. 46(4), pages 1445-65, September.
    7. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
    8. Levine, Ross, 1998. "The Legal Environment, Banks, and Long-Run Economic Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 596-613, August.
    9. 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, vol. 73(1), pages 55-74, February.
    10. Benhabib, Jess & Spiegel, Mark M, 2000. " The Role of Financial Development in Growth and Investment," Journal of Economic Growth, Springer, vol. 5(4), pages 341-60, December.
    11. Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
    12. 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.
    13. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
    14. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
    15. Khalifa Al-Yousif, Yousif, 2002. "Financial development and economic growth: Another look at the evidence from developing countries," Review of Financial Economics, Elsevier, vol. 11(2), pages 131-150.
    16. Danny Quah, 1992. "Empirical Cross-Section Dynamics in Economic Growth," FMG Discussion Papers dp154, Financial Markets Group.
    17. Ndikumana, Leonce, 2000. "Financial Determinants of Domestic Investment in Sub-Saharan Africa: Evidence from Panel Data," World Development, Elsevier, vol. 28(2), pages 381-400, February.
    18. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    19. H. W. Singer, 1998. "Growth, Development and Trade," Books, Edward Elgar, number 1358.
    20. Greenwood, Jeremy & Smith, Bruce D., 1997. "Financial markets in development, and the development of financial markets," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 145-181, January.
    21. Kupukile Mlambo, 2005. "Reviving Foreign Direct Investments in Southern Africa: Constraints and Policies," African Development Review, African Development Bank, vol. 17(3), pages 552-579.
    22. Saint-Paul, G., 1990. "Technological Choice, Financial Markets and Economic Development," DELTA Working Papers 90-30, DELTA (Ecole normale supérieure).
    23. Kletzer, Kenneth & Bardhan, Pranab, 1986. "Credit Markets and Patterns of International Trade," Department of Economics, Working Paper Series qt1g36f3sd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    24. Valerie R. Bencivenga & Bruce D. Smith, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 195-209.
    25. Luintel, Kul B. & Khan, Mosahid, 1999. "A quantitative reassessment of the finance-growth nexus: evidence from a multivariate VAR," Journal of Development Economics, Elsevier, vol. 60(2), pages 381-405, December.
    26. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
    27. Blackburn, Keith & Hung, Victor T Y, 1998. "A Theory of Growth, Financial Development and Trade," Economica, London School of Economics and Political Science, vol. 65(257), pages 107-24, February.
    28. César Calderón & Lin Liu, 2002. "The Direction of Causality Between Financial Development and Economic Growth," Working Papers Central Bank of Chile 184, Central Bank of Chile.
    29. repec:chb:bcchwp:03 is not listed on IDEAS
    30. Philip Arestis & Panicos Demetriades, . "Finance and growth: Institutional Considerations and Causality," Working Papers 9605, University of East London, Department of Economics.
    31. Hall, Stephen G & Milne, Alistair, 1994. "The Relevance of P-Star Analysis to UK Monetary Policy," Economic Journal, Royal Economic Society, vol. 104(424), pages 597-604, May.
    32. John Thornton, 1996. "Financial deepening and economic growth in developing economics," Applied Economics Letters, Taylor & Francis Journals, vol. 3(4), pages 243-246.
    33. Beck, Thorsten, 2001. "Financial development and international trade : is there a link?," Policy Research Working Paper Series 2608, The World Bank.
    34. Fase, M. M. G. & Abma, R. C. N., 2003. "Financial environment and economic growth in selected Asian countries," Journal of Asian Economics, Elsevier, vol. 14(1), pages 11-21, February.
    35. Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 638-646, November.
    36. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
    37. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bas:econst:y:2007:i:4:p:3-17. 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: (Diana Dimitrova)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.