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The Nexus of Financial Development and Economic Growth Across Developing Economies

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  • Okuyan Hasan Aydın

    (Professor, Bandirma Onyedi Eylul University, Faculty of Economics, and Administrative Sciences, 10200 Bandirma, BALIKESIR, Turkey)

Abstract

The relationship between financial development and economic growth has been discussed in the literature, but there is no consensus on it. This study aims to examine the relationship between financial development and economic growth in terms of developing countries. The data of 19 developing countries were analyzed individually in an attempt to reveal which of the views explaining the relationship between financial development and economic growth is predominantly valid. In the analysis, the bounds test developed by Pesaran et al. (2001) was used to determine the cointegration relationship, and the Toda Yamamoto causality test (1995) was used to determine the causality relationship. As a result, causality was determined from economic growth to financial development in four countries and from financial development to economic growth in four countries. In 11 countries, no causality was found. The results support the view that no approach is valid for every country.

Suggested Citation

  • Okuyan Hasan Aydın, 2022. "The Nexus of Financial Development and Economic Growth Across Developing Economies," South East European Journal of Economics and Business, Sciendo, vol. 17(1), pages 125-140, June.
    • Handle: RePEc:vrs:seejeb:v:17:y:2022:i:1:p:125-140:n:5
    DOI: 10.2478/jeb-2022-0009
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    More about this item

    Keywords

    Financial development; economic growth; developing countries; Bounds test; Toda Yamamoto causality test;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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