The Effect of Financial Development on Economic Growth in Fragile Economics (Kırılgan Ekonomilerde Finansal Gelişme Düzeyinin Ekonomik Büyüme Üzerindeki Etkisi)

Faruk Mike and Ali Eren Alper
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Faruk Mike: Hakkari University
Ali Eren Alper: Nigde Omer Halisdemir University

Business and Economics Research Journal, 2021, vol. 12, issue 1, 49-64

Abstract: This study aims to analyse the impact of financial development on economic growth for fragile five economies, which are based on the country classification by Morgan Stanley. Accordingly, Shin cointegration, Fourier Shin cointegration, and Toda-Yamamoto causality analyses were performed for the annual observations from 1980 to 2017. Fourier Shin cointegration test results reveal the existence of a long-run relationship between economic growth and financial development, capital stock, and human development index for four countries, namely Brazil, India, South Africa, and Turkey. On the other hand, Shin cointegration test results indicate the existence of cointegration relationship between series for Brazil, Indonesia, and South Africa. Dynamic Least Squares estimator shows that financial development has positive and statistically significant coefficients for four countries, namely India, Indonesia, South Africa, and Turkey (except Brazil). Finally, Toda-Yamamoto causality analyses reveal that there is only a unidirectional causality running from financial development to economic growth for Indonesia and South Africa. The findings reveal that the level of financial development is a significant parameter in fragile economies' sustainable growth processes.

Keywords: Financial Development; Economic Growth; Fragile Economics; Fourier Cointegration Test; Causality Analysis (search for similar items in EconPapers)
JEL-codes: C32 G15 O40 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:0530

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