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Financial Development and Economic Growth in Sri Lanka

  • Perera, N.


  • Paudel, R.C.

This study investigates the causal relationship between financial development and economic growth in Sri Lanka over the period 1955 to 2005. After considering the time series characteristics of six measures of financial development, Johansen cointegration and the appropriate Error Correction Model are used to investigate the causal relationship between financial development and economic growth. The findings suggest that broad money causes economic growth with two-way causality. The major finding of this study does not strongly support the view that financial development boosts economic growth.

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Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 9 (2009)
Issue (Month): 1 ()

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Handle: RePEc:eaa:aeinde:v:9:y:2009:i:1_14
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  1. Aubhik Khan, 1999. "Financial development and economic growth," Working Papers 99-11, Federal Reserve Bank of Philadelphia.
  2. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  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. Neven Valev & Felix Rioja, 2002. "Finance and the Sources of Growth at Various Stages of Economic Development," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0217, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  5. 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.
  6. 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.
  7. Ahmed, S. M. & Ansari, M. I., 1998. "Financial sector development and economic growth: The South-Asian experience," Journal of Asian Economics, Elsevier, vol. 9(3), pages 503-517.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  9. Zsolt Becsi & Ping Wang, 1997. "Financial development and growth," Economic Review, Federal Reserve Bank of Atlanta, issue Q 4, pages 46-62.
  10. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633, July.
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