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

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

Abstract

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.

Suggested Citation

  • Kandil, Magda & Shahbaz, Muhammad & Nasreen, Samia, 2013. "The Interaction between Globalization and Financial Development: New Evidence from Panel Co-integration and Causality Analysis," MPRA Paper 52148, University Library of Munich, Germany, revised 10 Dec 2013.
  • Handle: RePEc:pra:mprapa:52148
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    References listed on IDEAS

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    Cited by:

    1. Cheratian, Iman & Goltabar, Saleh, 2017. "Energy Consumption and Regional Economic Growth: The Case of Iranian Manufacturing Sector," MPRA Paper 78315, University Library of Munich, Germany.
    2. Muhammad Shahbaz & Hrushikesh Mallick & Mantu Kumar Mahalik & Shawkat Hammoudeh, 2018. "Is globalization detrimental to financial development? Further evidence from a very large emerging economy with significant orientation towards policies," Applied Economics, Taylor & Francis Journals, vol. 50(6), pages 574-595, February.

    More about this item

    Keywords

    Financial development; globalization; cointegration;

    JEL classification:

    • F1 - International Economics - - Trade

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