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Testing for causality among globalization, institution and financial development: Further evidence from three economic blocs

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  • Ibrahim Muhammad Muye
  • Ibrahim Yusuf Muye

Abstract

This paper employs several techniques to study the dynamic effect and causality among globalization, institutions and financial development. Specifically, we use the panel cointegration technique by Pedroni (1999, 2004); the DOLS approach by Kao and Chiang (1999); the FMOLS; the PMG technique of Pesaran et al. (1999) and the panel VECM causality approach. The panel cointegration test shows the existence of cointegration among our dataset. The Granger causality test demonstrates that causality runs from globalization to institutions, and institutions in turn Granger cause financial development specifically in the banking sector in the BRICS and MINT blocs. Globalization is further found to have a causal impact on the stock market, although bypassing the institutions channel. For the PMG, DOLS and FMOLS results, there is evidence of a positive long run relationship among globalization, institutions and financial development.

Suggested Citation

  • Ibrahim Muhammad Muye & Ibrahim Yusuf Muye, 2017. "Testing for causality among globalization, institution and financial development: Further evidence from three economic blocs," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 17(2), pages 117-132, June.
    • Handle: RePEc:bor:bistre:v:17:y:2017:i:2:p:117-132
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    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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