Revisiting Linkages between Financial Development, Trade Openness and Economic Growth in South Africa: Fresh Evidence from Combined Cointegration Test

Ali Polat (), Muhammad Shahbaz, Ijaz Ur Rehman and Saqlain Latif Satti

MPRA Paper from University Library of Munich, Germany

Abstract: This study revisits the impact of financial development on economic growth in South Africa by incorporating trade openness in the production function. The paper covers the period of 1970-2011. We apply the Bayer-Hanck combined cointegration approach to examine the long run relationship between the variables. Our results indicate that financial development stimulates economic growth. Capital use adds in economic growth but trade openness impedes economic growth. The demand-side hypothesis is validated in South Africa. This paper suggests that government should redirect trade policies to reap optimal fruits of financial development for long run economic growth.

Keywords: financial development; trade openness; economic growth; South Africa (search for similar items in EconPapers)
JEL-codes: C5 (search for similar items in EconPapers)
Date: 2013-11-20, Revised 2013-11-25
New Economics Papers: this item is included in nep-afr, nep-fdg and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:51724

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