Financial development and economic growth in developing economies: empirical evidence from the Caribbean
This paper uses a VAR and VECM framework to examine whether financial development causes growth or vice-versa employing aggregate annual time-series data on Barbados, Grenada, Jamaica, St. Lucia, St. Vincent and the Grenadines and Trinidad and Tobago. The results indicate that a long-run equilibrium relationship between financial development and economic growth exists only in Trinidad and Tobago and the response is bi-directional, lending support to both the denand-following and supply-leading hypothesis. Second, where there is only evidence of a short-run relationship, the results are mixed. Sometimes the causal link is from economic growth to financial development and on other occasions from financial development to economic growth. Third, our findings show that results are country specific and tend to vary with the kind of proxies used to measure financial development.
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Volume (Year): 8 (2005)
Issue (Month): 2 (Winter)
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