IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Financial Development and Poverty Reduction Nexus:A Cointegration and Causality Analysis in Bangladesh

  • Uddin, Gazi Salah
  • Shahbaz, Muhammad
  • AROURI, Mohamed El Hedi

This study investigates the relationship between financial development, economic growth and poverty reduction in Bangladesh using quarter frequency data over the period of 1975-2011. This issue is of importance for developing economics, since the role of financial sector in mobilizing and allocating savings into productive investments. All variables are tested for their order of integration using the ADF and Zivot-Andrews structural break tests. The results show that the variables are integrated at I(1). We then apply a simulation based the ARDL approach to cointegration by incorporating structural breaks stemming in the series for long run relation. Our empirical findings indicated that long run relationship between financial development, economic growth and poverty reduction exists in Bangladesh. The diagnostic tests show that the underlying assumptions of the statistical model are fulfilled. The implication of the empirical findings is explained in the main text.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://mpra.ub.uni-muenchen.de/49264/1/MPRA_paper_49264.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49264.

as
in new window

Length:
Date of creation: 19 Aug 2013
Date of revision: 23 Aug 2013
Handle: RePEc:pra:mprapa:49264
Contact details of provider: Postal:
Ludwigstraße 33, D-80539 Munich, Germany

Phone: +49-(0)89-2180-2459
Fax: +49-(0)89-2180-992459
Web page: https://mpra.ub.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  2. Ijaz Rehman & Muhammad Shahbaz, 2014. "Multivariate-based Granger causality between financial deepening and poverty: the case of Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(6), pages 3221-3241, November.
  3. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
  4. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
  5. Baum, Christopher F., 2004. "A review of Stata 8.1 and its time series capabilities," International Journal of Forecasting, Elsevier, vol. 20(1), pages 151-161.
  6. Sylviane Guillaumont Jeanneney & Kangni Kpodar, 2011. "Financial Development, Financial Instability and Poverty," Working Papers halshs-00564573, HAL.
  7. Muhammad, Shahbaz, 2012. "Does Trade Openness Affect Long Run Growth? Cointegration, Causality and Forecast Error Variance Decomposition Tests for Pakistan," MPRA Paper 37391, University Library of Munich, Germany, revised 10 Mar 2012.
  8. 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.
  9. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  10. Inoue, Takeshi & Hamori, Shigeyuki, 2010. "How has financial deepening affected poverty reduction in India? : empirical analysis using state-level panel data," IDE Discussion Papers 249, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  11. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  12. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
  13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  14. Nicholas M. Odhiambo, 2010. "Financial deepening and poverty reduction in Zambia: an empirical investigation," International Journal of Social Economics, Emerald Group Publishing, vol. 37(1), pages 41-53, January.
  15. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Jan.
  16. Sylviane Guillaumont Jeanneney & Kangni R Kpodar, 2008. "Financial Development and Poverty Reduction; Can There Be a Benefit Without a Cost?," IMF Working Papers 08/62, International Monetary Fund.
  17. Salvador Perez-Moreno, 2011. "Financial development and poverty in developing countries: a causal analysis," Empirical Economics, Springer, vol. 41(1), pages 57-80, August.
  18. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  19. Shaohua Chen & Martin Ravallion, 2004. "How Have the World's Poorest Fared since the Early 1980s?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 141-169.
  20. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Mar.
  21. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
  22. Ravallion, Martin & Datt, Gaurav, 2002. "Why has economic growth been more pro-poor in some states of India than others?," Journal of Development Economics, Elsevier, vol. 68(2), pages 381-400, August.
  23. Helmut Lütkepohl, 2006. "Structural vector autoregressive analysis for cointegrated variables," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 90(1), pages 75-88, March.
  24. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Sep.
  25. Hossein Jalilian & Colin Kirkpatrick, 2005. "Does Financial Development Contribute to Poverty Reduction?," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 636-656.
  26. Philip Arestis & Asena Caner, 2004. "Financial Liberalization and Poverty: Channels of Influence," Economics Working Paper Archive wp_411, Levy Economics Institute.
  27. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  28. Shenggen Fan & Peter Hazell & Sukhadeo Thorat, 2000. "Government Spending, Growth and Poverty in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1038-1051.
  29. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
  30. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2004. "Finance, Inequality, and Poverty: Cross-Country Evidence," NBER Working Papers 10979, National Bureau of Economic Research, Inc.
  31. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Dec.
  32. Muhammad Shahbaz & Faridul Islam, 2011. "Financial Development And Income Inequality In Pakistan: An Application Of Ardl Approach," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(1), pages 35-58, March.
  33. Gazi Salah Uddin & Phouphet Kyophilavong & Nasim Sydee, 2012. "The Casual Nexus of Banking Sector Development and Poverty Reduction in Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 304-311.
  34. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Nov.
  35. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  36. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Jun.
  37. Odhiambo, Nicholas M., 2009. "Finance-growth-poverty nexus in South Africa: A dynamic causality linkage," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 320-325, March.
  38. Uddin, Gazi Salah & Sjö, Bo & Shahbaz, Muhammad, 2013. "The causal nexus between financial development and economic growth in Kenya," Economic Modelling, Elsevier, vol. 35(C), pages 701-707.
  39. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  40. Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, vol. 28(6), pages 1075-1086, June.
  41. International Monetary Fund, 1997. "Sierra Leone; Recent Economic Developments," IMF Staff Country Reports 97/47, International Monetary Fund.
  42. Nicholas M. Odhiambo, 2010. "Is financial development a spur to poverty reduction? Kenya's experience," Journal of Economic Studies, Emerald Group Publishing, vol. 37(3), pages 343-353, September.
  43. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Aug.
  44. Patrick Honohan & Thorsten Beck, 2007. "Making Finance Work for Africa," World Bank Publications, The World Bank, number 6626, April.
  45. Philip Arestis & Asena Caner, 2009. "Financial liberalization and the geography of poverty," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 2(2), pages 229-244.
  46. anonymous, 1997. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue May.
  47. Quartey, Peter, 2005. "Financial Sector Development, Savings Mobilization and Poverty Reduction in Ghana," Working Paper Series RP2005/71, World Institute for Development Economic Research (UNU-WIDER).
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49264. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.