Where enterprise leads, finance follows. In-sample and out-of-sample evidence on the causal relation between finance and growth

Matthias Hartmann (), Helmut Herwartz () and Yabibal Walle
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Helmut Herwartz: Institute of Statistics and Econometrics, Christian-Albrechts-Universität zu Kiel

Economics Bulletin, 2012, vol. 32, issue 1, 871-882

Abstract: Evidence on the causality between finance and growth is largely inconclusive. In this study, a large cross-sectional data set of 74 economies for the period between 1975 and 2005 is examined. We summarise evidence from in-sample and out-of-sample causality tests based on rolling estimation steps. It is found that growth impacts on financial development in a stronger way than vice versa. These findings are consistent if economies are categorised into distinct income groups.

Keywords: Finance-growth nexus; Granger causality; directional accuracy (search for similar items in EconPapers)
JEL-codes: C5 O1 (search for similar items in EconPapers)
Date: 2012-03-13
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Citations: View citations in EconPapers (1)

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