Development And Financial Indicators In 164 Countries: Analysis Of Causality For 2021

This study presents an analysis of causality of Production per head (PH) with several financial indicators in 164 countries of the World in year 2021. The study includes several methodological suggestions on the use of Granger´s tests, the interest of mixed dynamic models for the analysis of unilateral or bilateral contemporaneous relationships and the coherence among the type of explained and explanatory variables, by using variables per capita, instead of ratios, to explain real GDP per capita. The empirical evidence shows a strong support to the direction of causality from PH to Deposits per head (DH) and to Bank Credit per head (BH). Economic development increases, savings, de private demand for liquidity and diminishes de risks of non performing loans (NPL): We estimate several equations and a multiequational model that considers the possible bilateral interdependence between PH and BH. Bank credit does not show a positive and signicant value on PH in the multiequational model. The empirical evidence of economic development includes the increase of Investment per capita (IH) as one important factor of development, independently of the financial source of Invesment (Bank or non Bank credit, direct investment or other ones). There is a bilateral relationship with PH when BH contributes to a sustained development of IH and/or to foster other factors with positive effect on development. International cooperation should contribute to increase sustained levels of IH in many countries, by several stable sources of financial support.