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Financial Development and Economic Growth: Time Series Evidence for the case of UK

Author

Listed:
  • Dimitrios Asteriou

    (City University, Department of Economics, UK)

  • Simon Price

    (City University, Department of Economics, UK)

Abstract

This paper investigates the effects of financial and stock market development on the process of economic growth in UK. We first present two alternative competing hypotheses regarding financial development and economic growth in terms of their casual relationships, in the context of supply-leading and demand-following hypothesis. The paper tests those two hypothesis using UK data. The evidence obtained from the cointegration and causality test strongly supports the supply-leading hypothesis, which suggests that the causal directions run from the development of the financial sector to the real sector (measured by real GDP per capita).

Suggested Citation

  • Dimitrios Asteriou & Simon Price, 2000. "Financial Development and Economic Growth: Time Series Evidence for the case of UK," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 4(2), pages 122-141, Winter.
  • Handle: RePEc:ekn:ekonom:v:4:y:2000:i:2:p:122-141
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    Cited by:

    1. B. Bhaskara Rao & Toani Takirua, 2010. "The effects of exports, aid and remittances on output: the case of Kiribati," Applied Economics, Taylor & Francis Journals, vol. 42(11), pages 1387-1396.
    2. Asteriou, Dimitrios, 2005. "The Linkage between Financial Liberalization and Economic Development: Empirical Evidence from Poland," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 383-399.
    3. Bhaskara Rao & Maheshwar Rao, 2005. "Determinants Of Growth Rate: Some Methodological Issues With Data From Fiji," Macroeconomics 0509003, EconWPA.

    More about this item

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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