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The causal nexus between financial development and economic growth in Kenya

  • Uddin, Gazi Salah
  • Sjö, Bo
  • Shahbaz, Muhammad

This paper aims to reexamine the relationship between financial development and economic growth in Kenya over the period of 1971–2011. Since the financial sector plays a vital role in mobilizing and allocating savings into productive ventures, the core issue of this investigation remains important for developing economics. The examination is based on a Cobb–Douglas production augmented by incorporating financial development. A simulation based ARDL bounds testing and Gregory and Hansen's structural break cointegration approaches are being utilized in this study. Cointegration is being found between the series in the presence of a structural break in 1992. It is also being established that, in the long run, the development of the financial sector has a positive impact on economic growth. Here remains an important policy implication for the concerned individuals of Kenya, that is, they may emphasize on financial development to ignite economic growth.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 35 (2013)
Issue (Month): C ()
Pages: 701-707

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Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:701-707
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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