Finance-Growth Link In Oecd Countries: Evidence From Panel Causality And Cointegration Tests

Chrysost Bangaké and Jude Eggoh ()

Brussels Economic Review, 2010, vol. 53, issue 3/4, 375-392

Abstract: In this paper we employ recently developed panel causality and cointegration techniques to examine the long-run relationship between financial development and economic growth of 25 OECD countries. Three measures of financial deepening and stock markets are respectively used. Our results point out a bidirectional causality between financial development and economic growth and support the point of view that although both banking sector and stock market could be a driving force of economic growth, the effects of the former are more powerful. The banking sector is the main channel through which financial development can affect economic growth. Furthermore, the effect of economic growth on stock market indices is more important compared to banking sector indicators. These results have some policy implications.

Keywords: Financial development; Economic growth; Panel causality; Panel cointegration (search for similar items in EconPapers)
JEL-codes: O11 O16 O31 (search for similar items in EconPapers)
Date: 2010
Note: Special Issue "26th Symposium on Money, Banking and Finance" Guest Editors :Sébastien Galanti and Grégory Levieuge
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