Financial Development in Kenya: a Dynamic Test of the Finance-led Growth Hypothesis

Nicholas Odhiambo

Economic Issues Journal Articles, 2008, vol. 13, issue 2, 21-36

Abstract: This study examines the direction of causality between financial development and economic growth in Kenya using a dynamic Granger causality model. The study has been motivated by the current debate on the inter-temporal causal relationship between financial development and economic growth in developing countries. The thrust of this debate has been whether there exists a finance-led growth response or a growth-led finance response between the two variables. To this end the study uses three proxies of financial development against real GDP per capita (a proxy for economic growth). The empirical results reveal that, although the causality between financial development and economic growth in Kenya is sensitive to the choice of measure for financial development, on balance the demand following response tends to predominate. The study, therefore, concludes that the argument that financial development unambiguously leads to economic growth can only be taken with a pinch of salt.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://www.economicissues.org.uk/Files/208Odhiambo.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:eis:articl:208odhiambo

Access Statistics for this article

More articles in Economic Issues Journal Articles from Economic Issues Contact information at EDIRC.
Bibliographic data for series maintained by Dan Wheatley ().