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Financial development and economic growth in South Korea: an application of smooth transition error correction analysis

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  • Song Zan Chiou-Wei
  • Zhen Zhu
  • Wun-Cheng Wu

Abstract

This article investigates the influences of financial development on economic growth for South Korea. The analysis is performed using an error correction model and a nonlinear smooth transition error correction technique. Empirical results from the cointegration test reveal that there is a long-run equilibrium relationship among financial development and economic growth. We also demonstrate that the nonlinear specification is more appropriate than the linear model and confirm the presence of nonlinearity in the aggregate output. Furthermore, we find that the short-run effect of financial development on economic growth is unstable despite the positive long-term effect.

Suggested Citation

  • Song Zan Chiou-Wei & Zhen Zhu & Wun-Cheng Wu, 2010. "Financial development and economic growth in South Korea: an application of smooth transition error correction analysis," Applied Economics, Taylor & Francis Journals, vol. 42(16), pages 2041-2052.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:16:p:2041-2052
    DOI: 10.1080/00036840701765312
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    Cited by:

    1. Zulal Denaux & Mert Topcu & Furkan Emirmahmutoglu, 2023. "Revisiting the financial development and economic growth nexus: Evidence from south Korea," Economics Bulletin, AccessEcon, vol. 43(3), pages 1328-1337.
    2. Phiri, Andrew, 2014. "Asymmetric co-integration and causality effects between financial development and economic growth in South Africa," MPRA Paper 53055, University Library of Munich, Germany.
    3. Andrew Phiri, 2015. "Asymmetric cointegration and causality effects between financial development and economic growth in South Africa," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 32(4), pages 464-484, October.
    4. Narayan, Seema & Doytch, Nadia & Nguyen, Tri Tung & Kluegel, Karl, 2016. "Trade of goods and services and risk sharing ability in international equity markets: Are these substitutes or complements?," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 485-503.
    5. Fukuda, Takashi, 2015. "Evidence of Korea’s Finance-Growth Nexus: VARX Analysis with Financial Crisis and Openness," MPRA Paper 98787, University Library of Munich, Germany.
    6. Anwar, Amar & Iwasaki, Ichiro, 2022. "The Finance–Growth Nexus inAsia : A Meta-Analytic Approach," CEI Working Paper Series 2022-03, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    7. Takashi Fukuda, 2016. "South Korea’s finance--growth nexus: evidence from VARX analysis with financial crisis and openness," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 9(1), pages 18-33, March.

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