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Do Technological Development and Financial Development Promote Economic Growth: Fresh Evidence from Romania

Author

Listed:
  • Ijaz Ur Rehman

    (University of Malaya, Kuala Lumpur, Malaysia.)

  • Muhammad Shahbaz

    (COMSATS Institute of Information Technology, Lahore, Pakistan.)

  • Phouphet Kyophilavong

    (National University of Laos, Laos.)

Abstract

Purpose: We study the relationship between financial development, technological development and economic growth in Romania. The study covers the time period of 1985-2011 in the case of Romania. We have applied structural break unit root in testing the integrating properties of the variables. Methodology: The cointegration for long run relationship between the variables is investigated by applying the ARDL bounds testing in the presence of structural breaks in the series. We construct aggregate indices of financial development and technological development using principal component analysis. Findings: Our empirical exercise shows the presence of cointegration between financial development, technological development and economic growth in the case of Romania. Financial development and technological development contribute to economic growth. Moreover, financial development leads technological development which Granger causes economic growth.Recommendations: Our empirical evidence suggests that economic growth is driven by financial development via technological development and that, in Romania,a stable financial system and capital market can facilitate technological innovations.

Suggested Citation

  • Ijaz Ur Rehman & Muhammad Shahbaz & Phouphet Kyophilavong, 2016. "Do Technological Development and Financial Development Promote Economic Growth: Fresh Evidence from Romania," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 4(2), pages 60-76, February.
    • Handle: RePEc:ijr:journl:v:4:y:2016:i:2:p:60-76
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    More about this item

    Keywords

    : Financial Development; Technological Development; Economic Growth; Romania;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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