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The causality between financial development and economic growth: case of Asian economies

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  • Ariuna Taivan

    (University of Minnesota Duluth)

Abstract

This paper investigates the long run relationship between financial development and economic growth for 16 Asian economies with different levels of income using of the system method, which is considered the most efficient manner. In addition, I employ Park's CCR test to estimate cointegrating vectors and run ordinary ECM as well as SURECM. Based on the results of Granger causality test in system method, I found strong evidence that causality exists between the financial development and economic growth, evidence that China has a huge impact on Asian economy, and a system method is superior to traditional regression methods. The question might give further guidance as to whether a well-developed financial sector is a necessary condition for a higher growth rates for developing countries and provide an important policy implication for countries that have financial sectors that are comparatively underdeveloped.

Suggested Citation

  • Ariuna Taivan, 2016. "The causality between financial development and economic growth: case of Asian economies," Economics Bulletin, AccessEcon, vol. 36(2), pages 1071-1082.
    • Handle: RePEc:ebl:ecbull:eb-15-00409
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    References listed on IDEAS

    as
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    Cited by:

    1. Neil A. Wilmot & Ariuna Taivan, 2021. "Examining the Impact of Financial Development on Energy Production in Emerging Economies," JRFM, MDPI, vol. 14(2), pages 1-17, February.

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    More about this item

    Keywords

    Financial development; economic growth; causality; cointegration; VECM; CCR; SURECM;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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