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Banking sector development and economic growth in ARF countries: the role of stock markets

Author

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  • Rudra P. Pradhan
  • Sasikanta Tripathy
  • Shashikant Pandey
  • Samadhan K. Bele

Abstract

The paper examines the long-run relationship between banking sector development, stock market development and economic growth in 26 ASEAN regional forum (ARF) countries for the period 1961-2012. Using principal component analysis for the construction of development indices and panel vector auto-regressive model for testing the Granger causalities, the study shows that a long-run relationship between banking sector development, stock market development and economic growth exists in ARF countries. The study also uniquely finds the existence of bidirectional causality between banking sector development and economic growth and a unidirectional causality from stock market development to economic growth. It, however, reveals the existence of unidirectional or bidirectional causal links between banking sector development and stock market development. Hence, future studies on economic growth that exclude the dynamic interrelationship of these variables will be unreliable.

Suggested Citation

  • Rudra P. Pradhan & Sasikanta Tripathy & Shashikant Pandey & Samadhan K. Bele, 2014. "Banking sector development and economic growth in ARF countries: the role of stock markets," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 7(2), pages 208-229, September.
    • Handle: RePEc:taf:macfem:v:7:y:2014:i:2:p:208-229
    DOI: 10.1080/17520843.2014.913071
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    Cited by:

    1. Hamed Ahmad Almahadin, 2022. "Spillover Effects of US Monetary Policy on Banking Development: Evidence from the Asian Region," Global Business Review, International Management Institute, vol. 23(1), pages 7-19, February.
    2. Muhammad Shahbaz & Ijaz Ur Rehman & Talat Afza, 2016. "Macroeconomic determinants of stock market capitalization in an emerging market: fresh evidence from cointegration with unknown structural breaks," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 9(1), pages 75-99, March.
    3. Khan, Muhammad Atif & Gu, Lulu & Khan, Muhammad Asif & Oláh, Judit, 2020. "Natural resources and financial development: The role of institutional quality," Journal of Multinational Financial Management, Elsevier, vol. 56(C).
    4. Madhu Sehrawat & A.K. Giri, 2017. "A Sectoral Analysis of the Role of Stock Market Development on Economic Growth: Empirical Evidence from Indian Economy," Global Business Review, International Management Institute, vol. 18(4), pages 911-923, August.
    5. Khan, Muhammad Asif & Khan, Muhammad Atif & Abdulahi, Mohamued Elyas & Liaqat, Idrees & Shah, Sayyed Sadaqat Hussain, 2019. "Institutional quality and financial development: The United States perspective," Journal of Multinational Financial Management, Elsevier, vol. 49(C), pages 67-80.
    6. Shravani Sharma & Supran Kumar Sharma, 2019. "Evidence on Relationship Between Economic Growth and Financial Development of Selected Northern Indian States: Using Panel VEC Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(4), pages 869-884, December.
    7. Debmallya Chatterjee & Amol S. Dhaigude, 2020. "An Integrated Fuzzy Cognitive Map Approach in Modelling Factors of Management Quality in Banking Performance," Global Business Review, International Management Institute, vol. 21(3), pages 763-779, June.
    8. Bamanga Umar & Sabri Nayan, 2018. "Poverty Reduction and Stock Market Development:Evidence from Africa," Pakistan Journal of Humanities and Social Sciences, International Research Alliance for Sustainable Development (iRASD), vol. 6(3), pages :338-356, September.
    9. Chletsos, Michael & Sintos, Andreas, 2024. "Political stability and financial development: An empirical investigation," The Quarterly Review of Economics and Finance, Elsevier, vol. 94(C), pages 252-266.

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