THE ANALYSIS OF THE RELATIONSHIP BETWEEN FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH WITH BOUND TESTING APPROACH IN TURKEY: 1987-2007

Halil Altintas and Yücel Ayricay ()
Additional contact information
Yücel Ayricay: K.Maras Sutcu Imam University

Anadolu University Journal of Social Sciences, 2010, vol. 10, issue 2, 71-98

Abstract: This paper has empirically examined the relationship between financial development and economic growth in Turkey by using quarterly observation over the period 1987–2007. The model is estimated with the bound testing approach to cointegration with the autoregressive distributed lag (ARDL) framework advanced by Pesaran et al (2001). The results suggest that there is a long-run relationship between real growth, financial development, trade openness and real interest rate. The coefficient of financial development indicates that a 1 percent increase in financial depth increases economic growth by 0.67 percent. While the coefficient of real deposit rate also suggests that a 1 percent rise in real interest rate will increases real output by 0.12 percent in the long run. Although, the coefficient of trade openness is statistically remained insignificant. Since the effects of financial development policy are higher than that of real interest rate which supports the argument that in a developing country like Turkey the availability of funds rather the cost of funds is more important to raise real income. Moreover, this result supports the Mckinnon and Shaw hypothesis that an increase in real interest rate facilitates financial savings and real income.

Keywords: Financial Development; Economic Growth; Bound Testing; Turkey (search for similar items in EconPapers)
JEL-codes: G21 N10 O11 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.anadolu.edu.tr/arastirma/hakemli_dergil ... 010-2/2010_02_06.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:and:journl:v:10:y:2010:i:2:p:71-98

Access Statistics for this article

Anadolu University Journal of Social Sciences is currently edited by Ramazan Geylan

More articles in Anadolu University Journal of Social Sciences from Anadolu University Contact information at EDIRC.
Bibliographic data for series maintained by Social Sciences Institute ( this e-mail address is bad, please contact ).