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Do financial systems spur economic growth in the USA? An empirical investigation

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  • Nyasha, Sheilla
  • Odhiambo, Nicholas M.

Abstract

In this paper, we use the autoregressive distributed lag (ARDL) bounds testing approach to examine thedynamic impact of both bank-based financial development and market-based financial development oneconomic growth in the United States of America (USA) during the period 1980 to 2012. In order toadequately capture the depth and width of the USA?s financial system, we used both bank-based andmarket-based financial development indices as proxies for bank-based and market-based financialsystems. These indices were constructed from a number of bank- and market-based financialdevelopment indicators, using the method of means-removed average. Our empirical results reveal thatboth bank-based and market-based financial development have a positive impact on economic growth inthe USA. These results apply irrespective of whether the regression analysis is conducted in the longrun or in the short run.

Suggested Citation

  • Nyasha, Sheilla & Odhiambo, Nicholas M., 2015. "Do financial systems spur economic growth in the USA? An empirical investigation," Working Papers 18833, University of South Africa, Department of Economics.
    • Handle: RePEc:uza:wpaper:18833
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    1. Akinola Ezekiel Morakinyo & Mabutho Sibanda, 2016. "Non-Performing Loans and Economic Growth in Nigeria: A Dynamic Analysis," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(4), pages 61-81, October-D.

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    More about this item

    Keywords

    United States of America; USA; Bank-Based Financial Development; Market-Based Financial Development ; Economic Growth;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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