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Financial Development and Economic Growth: Time Series Evidence from Egypt

  • Suleiman Abu-Bader


    (Department of Economics, Ben-Gurion University of the Negev)

  • Aamer Abu-Qarn


    (Department of Economics, Ben-Gurion University of the Negev)

This paper examines the causal relationship between financial development and economic growth in Egypt during the period 1960-2001 within a trivariate VAR setting. We employ four different measures of financial development and apply Granger causality tests using the cointegration and vector error correction methodology. Our results significantly support the view that financial development Granger-causes economic growth either through increasing investment efficiency or through increasing resources for investment. This finding suggests that the financial reforms launched in 1990 can explain the rebound in economic performance since then and that further deepening of the financial sector is an important instrument to stimulate saving/investment and therefore long-term economic growth.

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Paper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 206.

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Length: 36 pages
Date of creation: Jul 2005
Date of revision:
Publication status: Published in Journal of Policy Modeling as: Abu-Bader, S. and Abu-Qarn, A. S. (2008) “Financial Development and Economic Growth: The Egyptian Experience,” Journal of Policy Modeling, 30(5), pages 887-898.
Handle: RePEc:bgu:wpaper:206
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  24. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
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