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The Nexus Between Financial Development and Economic Growth in Lao PDR

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  • Kyophilavong, Phouphet
  • Salah Uddin, Gazi
  • Shahbaz, Muhammad

Abstract

The relationship between financial development and economic growth is not conclusive in existing economics literature. The aim of this paper is to test two hypotheses: ‘supply-leading’ hypothesis and ‘demand-following’ hypothesis, using Laos time series data. The ARDL bounds testing approach to cointegration is used to carry out this task. Our results confirm the presence of feedback effect between both variables. Financial development promotes economic growth and in resulting, economic growth leads financial development.

Suggested Citation

  • Kyophilavong, Phouphet & Salah Uddin, Gazi & Shahbaz, Muhammad, 2014. "The Nexus Between Financial Development and Economic Growth in Lao PDR," MPRA Paper 57308, University Library of Munich, Germany, revised 14 Jul 2014.
  • Handle: RePEc:pra:mprapa:57308
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    Keywords

    Finance-growth nexus; ARDL approach; Granger causality; Laos;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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