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On the Causal Link between Financial Development and Economic Growth: Case of Jordan


  • Bassam AbuAl-Foul
  • Ismail Genc
  • Musa Darayseh


This paper empirically examines the causal relation between financial development and economic growth in the case of Jordan for the period 1965 to 2004. That is, the paper attempts to provide answers to the following questions: a) Does financial development promotes economic growth? Or b) Does economic growth promotes financial development? Using Toda and Yamamoto (1995) Granger-no-causality model, the results reveal that there is a uni-directional Granger causality from economic growth to financial development (as defined by log (DC/GDP)).

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  • Bassam AbuAl-Foul & Ismail Genc & Musa Darayseh, "undated". "On the Causal Link between Financial Development and Economic Growth: Case of Jordan," Economics Working Papers 18-04/2014, School of Business Administration, American University of Sharjah.
  • Handle: RePEc:sha:ecowps:18-04/2014

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    1. Ahmed, S. M. & Ansari, M. I., 1998. "Financial sector development and economic growth: The South-Asian experience," Journal of Asian Economics, Elsevier, vol. 9(3), pages 503-517.
    2. Tsangyao Chang, 2002. "Financial development and economic growth in Mainland China: a note on testing demand-following or supply-leading hypothesis," Applied Economics Letters, Taylor & Francis Journals, vol. 9(13), pages 869-873.
    3. Jordan Shan, 2005. "Does financial development 'lead' economic growth? A vector auto-regression appraisal," Applied Economics, Taylor & Francis Journals, vol. 37(12), pages 1353-1367.
    4. Roger Atindehou & Jean Pierre Gueyie & Edoh Kossi Amenounve, 2005. "Financial intermediation and economic growth: evidence from Western Africa," Applied Financial Economics, Taylor & Francis Journals, vol. 15(11), pages 777-790.
    5. Teame Ghirmay, 2004. "Financial Development and Economic Growth in Sub‐Saharan African Countries: Evidence from Time Series Analysis," African Development Review, African Development Bank, vol. 16(3), pages 415-432.
    6. Shan, Jordan Z & Morris, Alan G & Sun, Fiona, 2001. "Financial Development and Economic Growth: An Egg-and-Chicken Problem?," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 443-454, August.
    7. Alif Darrat, 1999. "Are Financial Deepening and Economic Growth Causally Related? Another Look at the Evidence," International Economic Journal, Taylor & Francis Journals, vol. 13(3), pages 19-35.
    8. Zapata, Hector O & Rambaldi, Alicia N, 1997. "Monte Carlo Evidence on Cointegration and Causation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(2), pages 285-298, May.
    9. Calderon, Cesar & Liu, Lin, 2003. "The direction of causality between financial development and economic growth," Journal of Development Economics, Elsevier, vol. 72(1), pages 321-334, October.
    10. Khalifa Al-Yousif, Yousif, 2002. "Financial development and economic growth: Another look at the evidence from developing countries," Review of Financial Economics, Elsevier, vol. 11(2), pages 131-150.
    11. Jung, Woo S, 1986. "Financial Development and Economic Growth: International Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 333-346, January.
    12. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    13. Mouawiya Al-Awad & Nasri Harb, 2005. "Financial development and economic growth in the Middle East," Applied Financial Economics, Taylor & Francis Journals, vol. 15(15), pages 1041-1051.
    14. Jordan Shan & Alan Morris, 2002. "Does Financial Development 'Lead' Economic Growth?," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(2), pages 153-168.
    15. Ghali, Khalifa H, 1999. "Financial Development and Economic Growth: The Tunisian Experience," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 310-322, October.
    16. Tsangyao Chang & Steven Caudill, 2005. "Financial development and economic growth: the case of Taiwan," Applied Economics, Taylor & Francis Journals, vol. 37(12), pages 1329-1335.
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