The causality between financial development and economic growth: case of Asian economies

Ariuna Taivan ()
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Ariuna Taivan: University of Minnesota Duluth

Economics Bulletin, 2016, vol. 36, issue 2, 1071-1082

Abstract: This paper investigates the long run relationship between financial development and economic growth for 16 Asian economies with different levels of income using of the system method, which is considered the most efficient manner. In addition, I employ Park's CCR test to estimate cointegrating vectors and run ordinary ECM as well as SURECM. Based on the results of Granger causality test in system method, I found strong evidence that causality exists between the financial development and economic growth, evidence that China has a huge impact on Asian economy, and a system method is superior to traditional regression methods. The question might give further guidance as to whether a well-developed financial sector is a necessary condition for a higher growth rates for developing countries and provide an important policy implication for countries that have financial sectors that are comparatively underdeveloped.

Keywords: Financial development; economic growth; causality; cointegration; VECM; CCR; SURECM (search for similar items in EconPapers)
JEL-codes: G2 O1 (search for similar items in EconPapers)
Date: 2016-06-11
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Citations: View citations in EconPapers (1)

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