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A Causality Analysis between Financial Development and Economic Growth for Botswana


  • Joel Hinaunye Eita

    () (Investment and Trade Policy Centre, University of Pretoria)

  • André C. Jordaan

    () (Investment and Trade Policy Centre, University of Pretoria)


This paper analyses the causal relationship between financial development and economic growth in Botswana for the period 1977 to 2006, using Granger causality through cointegrated Vector Autoregression methods. The results show that there is a stable long- run relationship between financial development and economic growth. Financial development causes economic growth in Botswana. The causality runs from financial development to economic growth. The results suggest that the financial sector is important in the economic growth and development of Botswana. Financial intermediation and institutional financial reforms should be enhanced in order to promote Botswana’s economic growth.

Suggested Citation

  • Joel Hinaunye Eita & André C. Jordaan, 2007. "A Causality Analysis between Financial Development and Economic Growth for Botswana," Working Papers 200722, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:200722

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    References listed on IDEAS

    1. Van Wijnbergen, S., 1983. "Interest rate management in LDC's," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 433-452, September.
    2. Van Wijnbergen, Sweder, 1986. "Exchange rate management and stabilization policies in developing countries," Journal of Development Economics, Elsevier, vol. 23(2), pages 227-247, October.
    3. Ranjanendra Narayan Nag, 2000. "Stabilization Dynamics and Non Bank Financial Intermediaries," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 35(2), pages 193-209, July.
    4. van Wijnbergen, S., 1982. "Stagflationary effects of monetary stabilization policies : A quantitative analysis of South Korea," Journal of Development Economics, Elsevier, vol. 10(2), pages 133-169, April.
    5. Van Wijnbergen, S., 1985. "Macro-economic effects of changes in bank interest rates : Simulation results for South Korea," Journal of Development Economics, Elsevier, vol. 18(2-3), pages 541-554, August.
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    Cited by:

    1. Andrew Phiri, 2015. "Asymmetric cointegration and causality effects between financial development and economic growth in South Africa," Studies in Economics and Finance, Emerald Group Publishing, vol. 32(4), pages 464-484, October.
    2. Mmolainyane, Kelesego K. & Ahmed, Abdullahi D., 2015. "The impact of financial integration in Botswana," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 852-874.
    3. Adeniyi, Oluwatosin & Oyinlola, Abimbola & Omisakin, Olusegun & Egwaikhide, Festus O., 2015. "Financial development and economic growth in Nigeria: Evidence from threshold modelling," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 11-21.
    4. Ahmed, Abdullahi D. & Mmolainyane, Kelesego K., 2014. "Financial integration, capital market development and economic performance: Empirical evidence from Botswana," Economic Modelling, Elsevier, vol. 42(C), pages 1-14.

    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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