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Causal Linkages between Financial Development, Trade Openness and Economic Growth: Fresh Evidence from Innovative Accounting Approach in Case of Bangladesh

  • Mohamed Arouri
  • Gazi Salah Uddin
  • Kishwar Nawaz
  • Muhammad Shahbaz
  • Frédéric Teulon

This paper contributes to the literature by exploring the relationship between financial development, economic growth and trade openness in case of Bangladesh over the period 1975Q1-2011Q4. The ARDL bounds testing approach to cointegtaion and the innovative accounting approach for causality are used. Our results show that financial developpemnt, trade openness and economic growth are likned over the long-run. We find evidence in favor of the supply-side hypothesis while financial development and economic growth cause exports. Economic growth causes imports and feedback effect exists between trade openness and economic growth.

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Paper provided by Department of Research, Ipag Business School in its series Working Papers with number 2013-037.

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Length: 17 pages
Date of creation: 15 Oct 2013
Date of revision:
Handle: RePEc:ipg:wpaper:2013-037
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  1. Rahman, Mohammad Mafizur & Shahbaz, Muhammad, 2011. "Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan," MPRA Paper 29805, University Library of Munich, Germany, revised 24 Mar 2011.
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  3. Qazi Muhammad Adnan Hye & Faridul Islam, 2013. "Does financial development hamper economic growth: empirical evidence from Bangladesh," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(3), pages 558-582, June.
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  16. Muhammad, Shahbaz & mohammad, Mafizur Rahman, 2011. "The dynamic of financial development, imports, foreign direct investment and economic growth: cointegration and causality analysis in Pakistan," MPRA Paper 32181, University Library of Munich, Germany, revised 12 Jul 2011.
  17. Badi H. Baltagi & Panicos O. Demetriades & Siong Hook Law, 2008. "Financial Development and Openness: Evidence from Panel Data," Center for Policy Research Working Papers 107, Center for Policy Research, Maxwell School, Syracuse University.
  18. Christopher F. Baum, 2003. "A review of Stata 8.1 and its time series capabilities," Boston College Working Papers in Economics 581, Boston College Department of Economics.
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