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The Nexus between Financial Development and Economic Growth in Lao PDR

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  • Phouphet Kyophilavong
  • Gazi Salah Uddin
  • Muhammad Shahbaz

Abstract

The relationship between financial development and economic growth is not conclusive in the existing economics literature. The aim of this article is to test two hypotheses, ‘supply-leading’ hypothesis and ‘demand-following’ hypothesis, using time series data from Laos. The autoregressive distributed lag (ARDL) bounds testing approach to cointegration is used to carry out this task. Our results confirm the presence of feedback effect between both the variables. Financial development promotes economic growth and as a result, economic growth leads to financial development.

Suggested Citation

  • Phouphet Kyophilavong & Gazi Salah Uddin & Muhammad Shahbaz, 2016. "The Nexus between Financial Development and Economic Growth in Lao PDR," Global Business Review, International Management Institute, vol. 17(2), pages 303-317, April.
  • Handle: RePEc:sae:globus:v:17:y:2016:i:2:p:303-317
    DOI: 10.1177/0972150915619809
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    Keywords

    Finance–growth nexus; ARDL approach; Granger causality; Laos;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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