A Causal Analysis of Financial Development and Economic Growth

Muneeb-ud-din Ahmad and Tanweer Ul Islam
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Muneeb-ud-din Ahmad: University of Gujrat, Pakistan
Tanweer Ul Islam: Department of Economics, National University of Sciences & Technology, Pakistan

Economic Alternatives, 2024, issue 2, 259-272

Abstract: In terms of cause and effect, financial development and economic growth relationship has been a major empirical issue for researchers and policy makers. This study explores the causal linkages between financial development and economic growth catering for country specificity and structural shocks pertaining to different cross sections in SAARC and ASEAN countries by calling in the bootstrapping technique proposed by Konya (2006). We considered the panel estimation to allow for contemporaneous correlations and performed the Wald test for Granger Causality with country specific bootstrap critical values catering for structural breaks. Empirical investigation reveals the existence of both the demand and supply leading phenomena for the selected period of 1980-2019. The direction of causality is sensitive measures and proxies used for financial development.

Keywords: financial development; Bootstrapping; Causal Analysis; SAARC; ASEAN (search for similar items in EconPapers)
JEL-codes: C58 C60 (search for similar items in EconPapers)
Date: 2024
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