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The Interaction between Globalization and Financial Development: New Evidence from Panel Co-integration and Causality Analysis

  • Kandil, Magda
  • Shahbaz, Muhammad
  • Nasreen, Samia

The paper studies the impact of globalization on financial development in a sample of 32 developed and developing economies over the period 1989-2012. Indicators of financial development include three banking indicators (private sector credit, domestic credit, and liquid liabilities) and three indicators of stock market development (value traded, turnover ratio and stock market capitalization), all relevant to GDP. Two panel estimation methodologies are under consideration: panel co-integration and panel VAR. The findings reveal that financial development affects economic growth and globalization positively. Globalization helps mobilize economic growth, but does not help financial development as it helps increase access to external financing. Quality institutions do not impact financial development although the latter increases incentives for better quality institutions in support of sustainable growth.

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File URL: https://mpra.ub.uni-muenchen.de/52148/1/MPRA_paper_52148.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52148.

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Date of creation: 09 Dec 2013
Date of revision: 10 Dec 2013
Handle: RePEc:pra:mprapa:52148
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  8. 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.
  9. Stiglitz, Joseph E., 2004. "Globalization and growth in emerging markets," Journal of Policy Modeling, Elsevier, vol. 26(4), pages 465-484, June.
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  16. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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