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Financial Development and Economic Growth: Time Series Evidence for the case of UK

Dimitrios Asteriou () and Simon Price ()

Ekonomia, 2000, vol. 4, issue 2, 122-141

Abstract: This paper investigates the effects of financial and stock market development on the process of economic growth in UK. We first present two alternative competing hypotheses regarding financial development and economic growth in terms of their casual relationships, in the context of supply-leading and demand-following hypothesis. The paper tests those two hypothesis using UK data. The evidence obtained from the cointegration and causality test strongly supports the supply-leading hypothesis, which suggests that the causal directions run from the development of the financial sector to the real sector (measured by real GDP per capita).

JEL-codes: O16 G18 G28 (search for similar items in EconPapers)
Date: 2000
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Handle: RePEc:ekn:ekonom:v:4:y:2000:i:2:p:122-141