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Where enterprise leads, finance follows. In-sample and out-of-sample evidence on the causal relation between finance and growth

  • Matthias Hartmann

    ()

    (Institute of Statistics and Econometrics, Christian-Albrechts-Universität zu Kiel, Germany)

  • Helmut Herwartz

    ()

    (Institute of Statistics and Econometrics, Christian-Albrechts-Universität zu Kiel)

  • Yabibal M. Walle

    ()

    (Institute of Statistics and Econometrics, Christian-Albrechts-Universität zu Kiel)

Evidence on the causality between finance and growth is largely inconclusive. In this study, a large cross-sectional data set of 74 economies for the period between 1975 and 2005 is examined. We summarise evidence from in-sample and out-of-sample causality tests based on rolling estimation steps. It is found that growth impacts on financial development in a stronger way than vice versa. These findings are consistent if economies are categorised into distinct income groups.

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File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I1-P82.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 1 ()
Pages: 871-882

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Handle: RePEc:ebl:ecbull:eb-12-00161
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