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Relationship Between Financial Development and Growth: Bootstrap Causality Analysis for Turkey

Author

Listed:
  • Demez, Selim

    (Hakkari University)

  • Kizilkaya, Oktay

    (Hakkari University)

  • Dag, Mehmet

    (Siirt University)

Abstract

The impact of financial development on economic growth in the globalized world economy is a much-emphasized issue in the economic literature. The theoretical and empirical studies on the subject generally reveal that an advanced financial system will increase the economic growth by providing functionality to the markets or that economic growth will bring about the development of the financial system. In addition to these two perspectives, in the literature, there are few approaches suggest that there is no relationship between financial development and economic growth. Also, empirical studies examining the relationship between financial development and economic growth require different results regarding the relationship between variables, analysis periods and the econometric method used. In this study, the relationship between financial development and economic growth in Turkey was examined by Hacker and Hatemi-J (2012) bootstrap causality test using quarterly data 2006Q1-2018Q2 period. From total domestic loans that variables are taken to represent financial development, only one-way causality to economic growth was found. These results indicate that supply-leading hypothesis is valid in Turkey.

Suggested Citation

  • Demez, Selim & Kizilkaya, Oktay & Dag, Mehmet, 2019. "Relationship Between Financial Development and Growth: Bootstrap Causality Analysis for Turkey," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 10(3), pages 617-628, May.
    • Handle: RePEc:ris:buecrj:0411
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    More about this item

    Keywords

    Financial Development; Bootstrap Causality; Growth;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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