Banking sector development and economic growth in developing countries: a bootstrap panel Granger causality analysis

Khalil Mhadhbi (), Chokri Terzi and Ali Bouchrika ()
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Khalil Mhadhbi: University of Gabes
Ali Bouchrika: University of Gabes

Empirical Economics, 2020, vol. 58, issue 6, No 9, 2817-2836

Abstract: Abstract The purpose of this paper is to revisit the Granger causal relationship between banking sector development and economic growth for forty developing countries in the period 1970–2012. In order to capture the different aspects of banking sector development, we use two banking sector development indices and apply a panel bootstrap approach to Granger causality testing which takes into account cross-sectional dependence and heterogeneity issues. The empirical results show limited support for the supply-leading, demand-following and complementarity hypotheses, but provide evidence for a causal relationship between banking sector development and economic growth in twenty-five countries.

Keywords: Economic growth; Banking sector development; Cross-sectional dependency; Slope heterogeneity; Granger causality bootstrap (search for similar items in EconPapers)
JEL-codes: C22 C23 O43 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (10)

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Working Paper: Banking sector development and economic growth developing countries: A bootstrap panel Granger causality analysis (2017)
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DOI: 10.1007/s00181-019-01670-z

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