Causal Nexus between Financial Integration and Economic Growth: Does Nonlinearity Matter?

Sami Saafi (), Meriem Bel Haj Mohamed () and Makram Ben Doudou ()
Additional contact information
Sami Saafi: EAS – Faculty of Economic Sciences and Management of Mahdia University of Monastir, Postal: Mahdia Hiboun Cité Sidi Messaoud, Mahdia 5111, Tunisia
Meriem Bel Haj Mohamed: EAS – Faculty of Economic Sciences and Management of Mahdia University of Monastir, Postal: Mahdia Hiboun Cité Sidi Messaoud, Mahdia 5111, Tunisia
Makram Ben Doudou: EAS – Faculty of Economic Sciences and Management of Mahdia University of Monastir, Postal: Mahdia Hiboun Cité Sidi Messaoud, Mahdia 5111, Tunisia

Journal of Economic Integration, 2016, vol. 31, issue 4, 817-854

Abstract: Empirical studies that rely on a linear framework typically fail to find evidence of a causal link between financial integration and economic growth. In this study, we extend the analysis by applying both linear and nonlinear Granger-causality tests to data for 19 emerging and developing countries. Consistent with previous research, the linear causality analysis reveals only weak causal linkages between financial integration and economic growth. In contrast, the nonlinear causality analysis provides evidence of significant nonlinear causality in 18 out of 19 countries. The growth hypothesis holds true for Argentina, Bolivia, Colombia, Morocco, Tunisia, and Venezuela whereas a reverse relation was found in Brazil, Chile, Cote d’Ivoire, Costa Rica, Ecuador, Egypt, South Korea, Malaysia, Mexico, and Paraguay. The feedback hypothesis also exists in Bolivia and Uruguay. Overall, the divergent results in the 19 countries imply that policies cannot be uniformly implemented as there would have been different effects in each country.

Keywords: Financial Integration; Economic Growth; Nonlinear Granger Causality; Developing Countries; Emerging Economies (search for similar items in EconPapers)
JEL-codes: C14 C22 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.e-jei.org Full text (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:ris:integr:0700

Access Statistics for this article

Journal of Economic Integration is currently edited by Seongeun Kim

More articles in Journal of Economic Integration from Center for Economic Integration, Sejong University Contact information at EDIRC.
Bibliographic data for series maintained by Yunhoe Kim ().