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A Causal Analysis of Financial Development and Economic Growth

Author

Listed:
  • Muneeb-ud-din Ahmad

    (University of Gujrat, Pakistan)

  • Tanweer Ul Islam

    (Department of Economics, National University of Sciences & Technology, Pakistan)

Abstract

In terms of cause and effect, financial development and economic growth relationship has been a major empirical issue for researchers and policy makers. This study explores the causal linkages between financial development and economic growth catering for country specificity and structural shocks pertaining to different cross sections in SAARC and ASEAN countries by calling in the bootstrapping technique proposed by Konya (2006). We considered the panel estimation to allow for contemporaneous correlations and performed the Wald test for Granger Causality with country specific bootstrap critical values catering for structural breaks. Empirical investigation reveals the existence of both the demand and supply leading phenomena for the selected period of 1980-2019. The direction of causality is sensitive measures and proxies used for financial development.

Suggested Citation

  • Muneeb-ud-din Ahmad & Tanweer Ul Islam, 2024. "A Causal Analysis of Financial Development and Economic Growth," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 259-272, June.
    • Handle: RePEc:nwe:eajour:y:2024:i:2:p:259-272
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    File URL: https://www.unwe.bg/doi/eajournal/2024.2/EA.2024.2.03.pdf
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    More about this item

    Keywords

    financial development; Bootstrapping; Causal Analysis; SAARC; ASEAN;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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