IDEAS home Printed from https://ideas.repec.org/a/rfe/zbefri/v34y2016i2p529-554.html
   My bibliography  Save this article

The impacts of financial development on growth:A time-varying causality analysis for Turkey

Author

Listed:
  • Mehmet Zeki Ak

    (Faculty of Political Sciences, Sakarya University, Sakarya, Turkey)

  • Mustafa Kirca

    (Institute of Social Sciences, Anadolu University,Eskiºehir, Turkey)

  • Mehmet Nurullah Altintaº

    (Faculty of Political Sciences, Sakarya University, Sakarya, Turkey)

Abstract

The goal of this research is to determine whether the causal relationship between financial development and economic growth in Turkey is stable over time. For this purpose, causal relationship between financial development and economic growth in Turkey has been investigated by means of annual data for the period of 1960- 2013. Differently from previous studies in the literature, considering that causal relationship between financial development and economic growth might change depending on time, time-varying causality test developed by Balcilar, Ozdemir and Arslanturk (2010) has been used. The results show that there is a unidirectional causal relationship from financial development to economic growth and this relationship changes depending on time. It is seen that unidirectional causality from financial development to economic growth emerged during the periods of financial turmoil and political crisis. The basic conclusion is that there is no stable causal relationship between financial development and economic growth in Turkey over the given time period.

Suggested Citation

  • Mehmet Zeki Ak & Mustafa Kirca & Mehmet Nurullah Altintaº, 2016. "The impacts of financial development on growth:A time-varying causality analysis for Turkey," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 34(2), pages 529-554.
    • Handle: RePEc:rfe:zbefri:v:34:y:2016:i:2:p:529-554
    as

    Download full text from publisher

    File URL: https://www.efri.uniri.hr/sites/efri.uniri.hr/files/cr-collections/2/03-zeki-kirca-2016-2-1484117480.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nyakabawo, Wendy & Miller, Stephen M. & Balcilar, Mehmet & Das, Sonali & Gupta, Rangan, 2015. "Temporal causality between house prices and output in the US: A bootstrap rolling-window approach," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 55-73.
    2. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    3. Arestis, Philip & Demetriades, Panicos O & Luintel, Kul B, 2001. "Financial Development and Economic Growth: The Role of Stock Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 16-41, February.
    4. OZTURK, Ilhan, 2008. "Financial Development And Economic Growth: Evidence From Turkey," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 85-98.
    5. repec:bla:reviec:v:9:y:2001:i:3:p:443-54 is not listed on IDEAS
    6. Hsueh, Shun-Jen & Hu, Yu-Hau & Tu, Chien-Heng, 2013. "Economic growth and financial development in Asian countries: A bootstrap panel Granger causality analysis," Economic Modelling, Elsevier, vol. 32(C), pages 294-301.
    7. 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.
    8. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084, Central Bank of Chile.
    9. Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 638-646, November.
    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. Kar Muhsin & Peker Osman & Kaplan Muhittin, 2008. "Trade Liberalization, Financial Development and Economic Growth in The Long Term: The Case of Turkey," South East European Journal of Economics and Business, Sciendo, vol. 3(2), pages 25-38, November.
    12. Kar, Muhsin & NazlIoglu, Saban & AgIr, Hüseyin, 2011. "Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis," Economic Modelling, Elsevier, vol. 28(1-2), pages 685-693, January.
    13. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
    14. Hassan, M. Kabir & Sanchez, Benito & Yu, Jung-Suk, 2011. "Financial development and economic growth: New evidence from panel data," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(1), pages 88-104, February.
    15. Mustafa İsmihan & Burcu Dinçergök & Seyit Mümin Cilasun, 2013. "Finance, Instability, Debt and Growth: The Turkish Case, 1980-2010," EY International Congress on Economics I (EYC2013), October 24-25, 2013, Ankara, Turkey 271, Ekonomik Yaklasim Association.
    16. Arestis, Philip & Demetriades, Panicos O, 1997. "Financial Development and Economic Growth: Assessing the Evidence," Economic Journal, Royal Economic Society, vol. 107(442), pages 783-799, May.
    17. Odhiambo, Nicholas M., 2008. "Financial depth, savings and economic growth in Kenya: A dynamic causal linkage," Economic Modelling, Elsevier, vol. 25(4), pages 704-713, July.
    18. Herwartz, Helmut & Walle, Yabibal M., 2014. "Determinants of the link between financial and economic development: Evidence from a functional coefficient model," Economic Modelling, Elsevier, vol. 37(C), pages 417-427.
    19. Ismihan, Mustafa & Ozkan, F. Gulcin, 2012. "Public debt and financial development: A theoretical exploration," Economics Letters, Elsevier, vol. 115(3), pages 348-351.
    20. J. Shan & A. Morris & F. Sun, 1999. "Financial development and economic growth: An egg-and-chicken problem?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(4), pages 514-514, November.
    21. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2004. "Financial development and economic growth: evidence from panel unit root and cointegration tests," Journal of Development Economics, Elsevier, vol. 73(1), pages 55-74, February.
    22. Bangake, Chrysost & Eggoh, Jude C., 2011. "Further evidence on finance-growth causality: A panel data analysis," Economic Systems, Elsevier, vol. 35(2), pages 176-188, June.
    23. 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.
    24. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
    25. Ang, James B. & McKibbin, Warwick J., 2007. "Financial liberalization, financial sector development and growth: Evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 84(1), pages 215-233, September.
    26. Rousseau, P. L. & Wachtel, P., 2000. "Equity markets and growth: Cross-country evidence on timing and outcomes, 1980-1995," Journal of Banking & Finance, Elsevier, vol. 24(12), pages 1933-1957, December.
    27. Choe, Chongwoo & Moosa, Imad A., 1999. "Financial System and Economic Growth: The Korean Experience," World Development, Elsevier, vol. 27(6), pages 1069-1082, June.
    28. Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009. "Financial development and openness: Evidence from panel data," Journal of Development Economics, Elsevier, vol. 89(2), pages 285-296, July.
    29. Demetriades, Panicos O & Luintel, Kul B, 1996. "Financial Development, Economic Growth and Banker Sector Controls: Evidence from India," Economic Journal, Royal Economic Society, vol. 106(435), pages 359-374, March.
    30. Mustafa Ismihan & Burcu Dinçergök & Seyit Mümin Cilasun, 2017. "Revisiting the finance–growth nexus: the Turkish case, 1980–2010," Applied Economics, Taylor & Francis Journals, vol. 49(18), pages 1737-1750, April.
    31. 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.
    32. Balcilar, Mehmet & Ozdemir, Zeynel Abidin & Arslanturk, Yalcin, 2010. "Economic growth and energy consumption causal nexus viewed through a bootstrap rolling window," Energy Economics, Elsevier, vol. 32(6), pages 1398-1410, November.
    33. Levine, Ross, 1998. "The Legal Environment, Banks, and Long-Run Economic Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 596-613, August.
    34. Menyah, Kojo & Nazlioglu, Saban & Wolde-Rufael, Yemane, 2014. "Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach," Economic Modelling, Elsevier, vol. 37(C), pages 386-394.
    35. Arslanturk, Yalcin & Balcilar, Mehmet & Ozdemir, Zeynel Abidin, 2011. "Time-varying linkages between tourism receipts and economic growth in a small open economy," Economic Modelling, Elsevier, vol. 28(1), pages 664-671.
    36. Yang, Yung Y. & Yi, Myung Hoon, 2008. "Does financial development cause economic growth? Implication for policy in Korea," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 827-840.
    37. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    38. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    39. Dani Rodrik, 2009. "The Turkish Economy After The Crisis," Working Papers 2009/9, Turkish Economic Association.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abar Hayri, 2022. "An analysis of causal relationship between economic growth and financial development for Turkey: A MODWT—Granger causality test," Economics and Business Review, Sciendo, vol. 8(3), pages 59-81, October.
    2. Muhammad Akram GILAL* & Muhammad AJMAIR** & Sohail FAROOQ***, 2019. "Structural Changes And Economic Growth In Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 29(1), pages 35-51.
    3. Amira Akl Ahmed, 2018. "Bank-Based Financial Development and Economic Growth: Time-Varying Causality Analysis for Egypt," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(4), pages 123-135, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pradhan, Rudra P. & Arvin, Mak B. & Bahmani, Sahar & Hall, John H. & Norman, Neville R., 2017. "Finance and growth: Evidence from the ARF countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 136-148.
    2. Rudra P. Pradhan & Mak B. Arvin & John H. Hall & Sahar Bahmani, 2014. "Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries," Review of Financial Economics, John Wiley & Sons, vol. 23(4), pages 155-173, November.
    3. Jagadish Prasad Bist & Nar Bahadur Bista, 2018. "Finance–Growth Nexus in Nepal: An Application of the ARDL Approach in the Presence of Structural Breaks," Vikalpa: The Journal for Decision Makers, , vol. 43(4), pages 236-249, December.
    4. James B. Ang, 2008. "A Survey Of Recent Developments In The Literature Of Finance And Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 536-576, July.
    5. Ismail Senturk & Fiaz Ahmad Sulehri & Syeda Mehak Ali, 2022. "Financial Development and Innovation Led-Growth: A Case of Selected Developing Countries," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(3), pages 81-97, September.
    6. Polat, Ali & Shahbaz, Muhammad & Ur Rehman, Ijaz & Satti, Saqlain Latif, 2013. "Revisiting Linkages between Financial Development, Trade Openness and Economic Growth in South Africa: Fresh Evidence from Combined Cointegration Test," MPRA Paper 51724, University Library of Munich, Germany, revised 25 Nov 2013.
    7. Okuyan Hasan Aydın, 2022. "The Nexus of Financial Development and Economic Growth Across Developing Economies," South East European Journal of Economics and Business, Sciendo, vol. 17(1), pages 125-140, June.
    8. Rudra P. Pradhan & Mak B. Arvin & Neville R. Norman & John H. Hall, 2014. "The dynamics of banking sector and stock market maturity and the performance of Asian economies," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 30(1), pages 16-44, May.
    9. Tebogo Tshepo Kubanji & Simangaliso Biza-Khupe & Mogotsinyana Mapharing, 2021. "The Causality Relationship Between Financial Sector Profitability and the Botswana Economy," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(3), pages 381-392, May.
    10. Ebru TOPCU Author- Workplace-Name: Nevsehir Haci Bektas Veli University, Department of Economics, Turkey, 2016. "Reexamining Finance-Growth Nexus: A New Literature Survey," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(Special I), pages 1-7, august.
    11. repec:mth:ijafr8:v:8:y:2018:i:4:p:399-423 is not listed on IDEAS
    12. Pradhan, Rudra P. & Arvin, Mak B. & Norman, Neville R., 2015. "Insurance development and the finance-growth nexus: Evidence from 34 OECD countries," Journal of Multinational Financial Management, Elsevier, vol. 31(C), pages 1-22.
    13. Magda Kandil & Muhammad Shahbaz & Mantu Kumar Mahalik & Duc Khuong Nguyen, 2017. "The drivers of economic growth in China and India: globalization or financial development?," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 16(1), pages 54-84, April.
    14. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    15. Chow, Sheung Chi & Vieito, João Paulo & Wong, Wing Keung, 2019. "Do both demand-following and supply-leading theories hold true in developing countries?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 513(C), pages 536-554.
    16. Thorsten Beck, 2009. "The Econometrics of Finance and Growth," Palgrave Macmillan Books, in: Terence C. Mills & Kerry Patterson (ed.), Palgrave Handbook of Econometrics, chapter 25, pages 1180-1209, Palgrave Macmillan.
    17. Uslu, Çağrı Levent & Aydoğan, Ebru Tomris & Ketenci, Natalya, 2015. "Economic Growth, Financial Development, and Trade Openness in Emerging Markets: Panel Approach," MPRA Paper 64722, University Library of Munich, Germany.
    18. Peia, Oana & Roszbach, Kasper, 2015. "Finance and growth: Time series evidence on causality," Journal of Financial Stability, Elsevier, vol. 19(C), pages 105-118.
    19. Senra Hodelin, Reynaldo, 2022. "Public banking and economic growth: The experiences of 10 countries since the 1950s until 2017," Economic Systems, Elsevier, vol. 46(1).
    20. Yuri Quixina & Álvaro Almeida, 2014. "Financial Development and Economic Growth in a Natural Resource Based Economy: Evidence from Angola," FEP Working Papers 542, Universidade do Porto, Faculdade de Economia do Porto.
    21. Shrutikeerti Kaushal & Amlan Ghosh, 2016. "Financial Institutions and Economic Growth: An Empirical Analysis of Indian Economy in the Post Liberalized Era," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1003-1013.

    More about this item

    Keywords

    financial development; growth; time-varying causality;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rfe:zbefri:v:34:y:2016:i:2:p:529-554. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Danijela Ujcic (email available below). General contact details of provider: https://edirc.repec.org/data/efrijhr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.