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Financial Deepening-Economic Performance Nexus,An attempt to Study Granger-Causality through Spectral Time Series Analysis in MENA Countries

Badry (ph.d) Hechmy ()

International Journal of Academic Research in Management and Business, 2016, vol. 1, issue 1, 24-38

Abstract: In this paper it is considered that the series may have a repetitive or cyclical behavior across time by referring to the Fourier analysis; which is an important part in the modern treatment of Economic Time Series. The goal of this is to test the causality Granger between financial deepening and economic performance in MENA countries using the spectral analysis that is a special case of the Fourier analysis; according to different time horizons (short, medium and long term) without subdividing the study period which extends from 1970 to 2014. For reliable results, the sample was divided into two subsamples, the countries of the Gulf Cooperation Council (GCC), which have a high income, and other countries. On high frequencies, estimates show that the real and financial sectors maintain causal relationships, showing a limit of the conventional method of causality assessment that sets in many cases a complete lack of connection between the proxies. In the long term, finance dominates in some Gulf Cooperation Council (GCC) countries while we have the opposite effect in other countries. The main conclusion that one can reach is that the causal relationship between finance and growth is not linear, but it varies depending on the chosen time horizon.

Keywords: Financial Depth; Economic Performance; Spectral Analysis; Fourier Transform; Granger Causality. (search for similar items in EconPapers)
Date: 2016
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