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Bond Market Development, Economic Growth and Other Macroeconomic Determinants: Panel VAR Evidence

Rudra P. Pradhan (), Mak Arvin (), Sara E. Bennett (), Mahendhiran Nair () and John H. Hall ()
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Rudra P. Pradhan: Indian Institute of Technology
Sara E. Bennett: Lynchburg College
Mahendhiran Nair: Monash University Malaysia
John H. Hall: University of Pretoria, Pretoria

Asia-Pacific Financial Markets, 2016, vol. 23, issue 2, 175-201

Abstract: Abstract This paper examines causal relationships between bond market development, economic growth and four other macroeconomic variables in 35 countries for the period 1993–2011. Bond market development is defined in terms of the significance and presence of public sector, private sector, and international bond issues. Additional covariates being considered are the inflation rate, the real effective exchange rate, the real interest rate, and a measure of openness to international trade. We use a panel vector auto-regression model to reveal the nature of Granger causality among these variables. Specifically, we find that bond market development and the four macroeconomic covariates may be long-run causative factors for economic growth. Thus, policy makers seeking to foster economic growth are warned to check multi-causal studies involving all these variables before setting their policies.

Keywords: Bond market development; Economic growth; Other causative factors (search for similar items in EconPapers)
JEL-codes: G10 O16 O53 (search for similar items in EconPapers)
Date: 2016
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