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Asymmetric co-integration and causality effects between financial development and economic growth in South Africa

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  • Phiri, Andrew

Abstract

This paper investigates asymmetric co-integration and causality effects between financial development and economic growth for South African data spanning over the period of 1992 to 2013. To this end, we make use of the momentum threshold autoregressive (MTAR) approach which allows for threshold error correction (TEC) modelling and granger causality analysis between the variables. In carrying out our empirical analysis, we employ six measures of the financial development variables against gross domestic per capita, that is, three measures which proxy banking activity and another three proxies for stock market development. The empirical results generally indicate an abrupt asymmetric co-integration relationship between banking activity and economic growth, on one hand, and a smooth co-integration relationship between stock market activity and economic growth, on the other hand. Moreover, causality analysis generally reveals that while banking activity tends to granger causes economic growth, stock market activity is, however, caused by economic growth increase.

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  • Phiri, Andrew, 2014. "Asymmetric co-integration and causality effects between financial development and economic growth in South Africa," MPRA Paper 53055, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:53055
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    Cited by:

    1. Andrew Phiri, 2017. "Long-run equilibrium adjustment between inflation and stock market returns in South Africa: a nonlinear perspective," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 9(1), pages 19-33.
    2. Sinazo Guduza & Andrew Phiri, 2017. "Efficient market hypothesis: Evidence from the JSE equity and bond markets," Working Papers 1718, Department of Economics, Nelson Mandela University, revised Dec 2017.
    3. Khoza, Keorapetse & Thebe, Relebogile & Phiri, Andrew, 2016. "Nonlinear impact of inflation on economic growth in South Africa: A smooth transition regression (STR) analysis," MPRA Paper 73840, University Library of Munich, Germany.
    4. Andrew Phiri, 2017. "The Unemployment-Stock Market Relationship in South Africa: Evidence from Symmetric and Asymmetric Cointegration Models," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 15(3 (Fall)), pages 231-254.
    5. Phiri, Andrew, 2016. "Does military spending nonlinearly affect economic growth in South Africa?," MPRA Paper 69730, University Library of Munich, Germany.

    More about this item

    Keywords

    Financial development; Economic growth; Threshold co-integration; Asymmetric causality; Emerging economy; South Africa;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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