Asymmetric co-integration and causality effects between financial development and economic growth in South Africa

Andrew Phiri

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates asymmetric co-integration and causality effects between financial development and economic growth for South African data spanning over the period of 1992 to 2013. To this end, we make use of the momentum threshold autoregressive (MTAR) approach which allows for threshold error correction (TEC) modelling and granger causality analysis between the variables. In carrying out our empirical analysis, we employ six measures of the financial development variables against gross domestic per capita, that is, three measures which proxy banking activity and another three proxies for stock market development. The empirical results generally indicate an abrupt asymmetric co-integration relationship between banking activity and economic growth, on one hand, and a smooth co-integration relationship between stock market activity and economic growth, on the other hand. Moreover, causality analysis generally reveals that while banking activity tends to granger causes economic growth, stock market activity is, however, caused by economic growth increase.

Keywords: Financial development; Economic growth; Threshold co-integration; Asymmetric causality; Emerging economy; South Africa (search for similar items in EconPapers)
JEL-codes: C32 E51 E58 G21 G23 G28 (search for similar items in EconPapers)
Date: 2014-01-20
New Economics Papers: this item is included in nep-afr, nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Asymmetric cointegration and causality effects between financial development and economic growth in South Africa (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:53055

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