Financial Innovation, Stock Market Development, and Economic Growth: An Application of ARDL Model

Md. Qamruzzaman and Jianguo Wei
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Md. Qamruzzaman: School of Economics, Wuhan University of Technology, Wuhan 430070, China
Jianguo Wei: School of Economics, Wuhan University of Technology, Wuhan 430070, China

IJFS, 2018, vol. 6, issue 3, 1-30

Abstract: This study aims to explore the relationship between economic growth, financial innovation, and stock market development of Bangladesh for the period 1980–2016. To investigate long-run cointegration, this study used the autoregressive distributed lagged (ARDL) bounds testing approach. In addition, the Granger-causality test is used to identify directional causality between research variables under the error correction term. Study findings from the ARDL bound testing approach confirm the existence of a long-run association between financial innovation, stock market development, and economic growth. Furthermore, the findings from the Granger-causality test support bidirectional causality between financial innovation, economic growth and stock market development, and economic growth both in the long run and short run. These findings support the theory that market-based financial development and financial innovation in the financial system can spur economic development.

Keywords: ARDL; economic growth; financial innovation; stock market development; Granger-causality (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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