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Broadband penetration, financial development, and economic growth nexus: evidence from the Arab League countries

Rudra P. Pradhan, Mak Arvin (), Sahar Bahmani and Sara E. Bennett

Macroeconomics and Finance in Emerging Market Economies, 2017, vol. 10, issue 2, 151-171

Abstract: This paper examines the mutual relationship between broadband penetration, financial development, and economic growth in the 22 Arab League countries for the period between 2001 and 2013. Financial development (represented by broad money supply, claims on the private sector, domestic credit to the private sector, domestic credit provided by the banking sector, market capitalization, turnover ratio, and traded stocks) is assessed both individually, and by a composite index. Our results reveal that there is a long-run equilibrium relationship between broadband penetration, financial development, and economic growth. Additionally, we use a panel vector autoregression model to reveal the nature of Granger causality between the covariates. The most important insight of this study is the presence of bidirectional causality from economic growth to broadband penetration in the long run. In addition, we find that financial development together with broadband penetration Granger-cause economic growth in the long run.

Date: 2017
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