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Revisiting Linkages between Financial Development, Trade Openness and Economic Growth in South Africa: Fresh Evidence from Combined Cointegration Test

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  • Polat, Ali
  • Shahbaz, Muhammad
  • Ur Rehman, Ijaz
  • Satti, Saqlain Latif

Abstract

This study revisits the impact of financial development on economic growth in South Africa by incorporating trade openness in the production function. The paper covers the period of 1970-2011. We apply the Bayer-Hanck combined cointegration approach to examine the long run relationship between the variables. Our results indicate that financial development stimulates economic growth. Capital use adds in economic growth but trade openness impedes economic growth. The demand-side hypothesis is validated in South Africa. This paper suggests that government should redirect trade policies to reap optimal fruits of financial development for long run economic growth.

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  • Polat, Ali & Shahbaz, Muhammad & Ur Rehman, Ijaz & Satti, Saqlain Latif, 2013. "Revisiting Linkages between Financial Development, Trade Openness and Economic Growth in South Africa: Fresh Evidence from Combined Cointegration Test," MPRA Paper 51724, University Library of Munich, Germany, revised 25 Nov 2013.
  • Handle: RePEc:pra:mprapa:51724
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    Cited by:

    1. Uslu, Çağrı Levent & Aydoğan, Ebru Tomris & Ketenci, Natalya, 2015. "Economic Growth, Financial Development, and Trade Openness in Emerging Markets: Panel Approach," MPRA Paper 64722, University Library of Munich, Germany.

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    Keywords

    financial development; trade openness; economic growth; South Africa;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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