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Financial Development and Growth: A Re-Examination using a Panel Granger Causality Test

Author

Listed:
  • Christophe Hurlin

    (LEO - Laboratoire d'économie d'Orleans [2008-2011] - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)

  • Baptiste Venet

    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

Abstract

In this paper we investigate the causal relationship between financial development and economic growth. We use an innovative econometric method which is based on a panel test of the Granger non causality hypothesis. We implement various tests with a sample of 63 industrial and developing countries over the 1960-1995 and 1960-2000 periods. We use three standard indicators of financial development. The results provide support for a robust causality relationship from economic growth to the financial development. On the contrary, the non causality hypothesis from financial development indicators to economic growth can not be rejected in most of the cases. However, these results only imply that, if such a relationship exists, it can not be easily identified in a simply bi-variate Granger causality test.

Suggested Citation

  • Christophe Hurlin & Baptiste Venet, 2008. "Financial Development and Growth: A Re-Examination using a Panel Granger Causality Test," Working Papers halshs-00319995, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00319995
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00319995
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    References listed on IDEAS

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    Keywords

    Economic Growth; Granger Causality Tests; Panel Data; Financial Development;
    All these keywords.

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