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Financial Development and Economic Growth: Time Series Evidence for the case of UK

Author

Listed:
  • Dimitrios Asteriou

    (City University, Department of Economics, UK)

  • Simon Price

    (City University, Department of Economics, UK)

Abstract

This paper investigates the effects of financial and stock market development on the process of economic growth in UK. We first present two alternative competing hypotheses regarding financial development and economic growth in terms of their casual relationships, in the context of supply-leading and demand-following hypothesis. The paper tests those two hypothesis using UK data. The evidence obtained from the cointegration and causality test strongly supports the supply-leading hypothesis, which suggests that the causal directions run from the development of the financial sector to the real sector (measured by real GDP per capita).

Suggested Citation

  • Dimitrios Asteriou & Simon Price, 2000. "Financial Development and Economic Growth: Time Series Evidence for the case of UK," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 4(2), pages 122-141, Winter.
    • Handle: RePEc:ekn:ekonom:v:4:y:2000:i:2:p:122-141
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    Cited by:

    1. repec:cty:dpaper:10.11130/jei.2005.20.2.383 is not listed on IDEAS
    2. Ali Umar Ahmad & Adam Abdullah & Zunaidah Sulong & Ahmad Tijjani Abdullahi, 2015. "The Review of Stock Returns and Macroeconomic Variables," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(5), pages 154-181, May.
    3. B. Bhaskara Rao & Toani Takirua, 2010. "The effects of exports, aid and remittances on output: the case of Kiribati," Applied Economics, Taylor & Francis Journals, vol. 42(11), pages 1387-1396.
    4. Dimitrios Asteriou & Konstantinos Spanos & Emmanouil Trachanas, 2024. "Financial development, economic growth and the role of fiscal policy during normal and stress times: Evidence for 26 EU countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2495-2514, April.
    5. Bhaskara Rao & Maheshwar Rao, 2005. "Determinants Of Growth Rate: Some Methodological Issues With Data From Fiji," Macroeconomics 0509003, University Library of Munich, Germany.
    6. repec:cty:dpaper:1417 is not listed on IDEAS
    7. repec:cty:dpaper:03/03 is not listed on IDEAS

    More about this item

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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