Financial Development and Economic Growth: Time Series Evidence from Egypt

Abu-Bader, Suleiman () and Aamer Abu-Qarn ()
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Abu-Bader, Suleiman: Department of Economics, Ben-Gurion University of the Negev

No 206, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: This paper examines the causal relationship between financial development and economic growth in Egypt during the period 1960-2001 within a trivariate VAR setting. We employ four different measures of financial development and apply Granger causality tests using the cointegration and vector error correction methodology. Our results significantly support the view that financial development Granger-causes economic growth either through increasing investment efficiency or through increasing resources for investment. This finding suggests that the financial reforms launched in 1990 can explain the rebound in economic performance since then and that further deepening of the financial sector is an important instrument to stimulate saving/investment and therefore long-term economic growth.

Keywords: Financial development; Economic growth; Egypt; Granger causality; Error-correction models; Cointegration (search for similar items in EconPapers)
JEL-codes: O16 G18 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-fdg
Date: 2005-07
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Forthcoming in Journal of Policy Modeling

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http://www.econ.bgu.ac.il/papers/206.pdf First version, 2005 (application/pdf)

Related works:
Working Paper: Financial Development and Economic Growth: Time Series Evidence from Egypt (2005)
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