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Re-Examining The Finance-Growth Nexus: Structural Break, Threshold Cointegration And Causality Evidence From The Ecowas

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  • Loesse Jacques Esso

    () (Ecole Nationale Superieure de Statistique et d Economie Appliquee)

Abstract

The aim of this paper is to re-examine the cointegrating and causal relationship between financial development and economic growth in the ECOWAS. To this end, we use the Gregory and Hansen (1996a, 1996b) approach to cointegration with structural change and the procedure for non-causality test of Toda and Yamamoto (1995). Data are from the World Bank (2007) and cover the period 1960-2005. We show that there is a long-run relationship between financial development and economic growth in six countries, namely, Burkina Faso, Cape Verde, Cote d¡¯Ivoire, Ghana, Liberia and Sierra Leone. In addition, we show that financial development ¡®leads¡¯ economic growth in Ghana and Mali while growth causes finance in Burkina Faso, Cote d'Ivoire and Sierra Leone, and a bidirectional causality in Cape Verde and Liberia. The policy implication is that Cape Verde, Ghana and Mali should give policy priority to financial reform while Burkina Faso, Cote d¡¯Ivoire and Sierra Leone should promote economic growth.

Suggested Citation

  • Loesse Jacques Esso, 2010. "Re-Examining The Finance-Growth Nexus: Structural Break, Threshold Cointegration And Causality Evidence From The Ecowas," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(3), pages 57-79, September.
  • Handle: RePEc:jed:journl:v:35:y:2010:i:3:p:57-79
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    2. Tze-Haw Chan & Hooi Hooi Lean & Chee-Wooi Hooy, 2014. "A macro assessment of China effects on Malaysian exports and trade balances," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 7(1), pages 18-37, January.
    3. Helmi Hamdi & Rashid Sbia & Bedri Kamil Onur Tas, 2014. "Financial Deepening and Economic Growth in Gulf Cooperation Council Countries," International Economic Journal, Taylor & Francis Journals, vol. 28(3), pages 459-473, September.
    4. Pradhan, Rudra P. & Arvin, Mak B. & Hall, John H. & Bahmani, Sahar, 2014. "Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries," Review of Financial Economics, Elsevier, vol. 23(4), pages 155-173.
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    7. Oluwatosin Adeniyi & Festus O. Egwaikhide, 2013. "Saving-Investment Nexus In Developing Countries: Does Financial Development Matter?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(2), pages 119-140, June.
    8. Muhammad Shahbaz & Ijaz Ur Rehman & Ahmed Taneem Muzaffar, 2015. "Re-Visiting Financial Development and Economic Growth Nexus: The Role of Capitalization in Bangladesh," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 452-471, September.
    9. Huiran Pan & Chun Wang, 2013. "Financial Development And Economic Growth: A New Investigation," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(1), pages 27-46, March.
    10. Michael ADUSEI, 2013. "Exploring the Moderating Effect of Entrepreneurial Activity on the Finance-Growth Nexus in Africa?," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(8), pages 990-1004, August.
    11. Guido Baldi, 2013. "Physical And Human Capital Accumulation And The Evolution Of Income And Inequality," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(3), pages 57-83, September.
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    More about this item

    Keywords

    Threshold Cointegration; Financial Development; Granger Causality; Growth;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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