Does Financial Development Lead to Poverty Reduction in China? Time Series Evidence

Sin-Yu Ho and Bernard Njindan Iyke

MPRA Paper from University Library of Munich, Germany

Abstract: The impact of financial development on poverty reduction has received attention in the literature recently. While the connection between financial development and poverty may appear straight forward in theory, in empirics it may be much complicated. This study attempted at empirically assessing the causal links between financial development and poverty reduction in China for the period 1985–2014. The study used the Toda-Yamamoto causality test to avoid pretesting bias that has featured majority of the existing studies. The study utilized two standard proxies for financial development, namely: the domestic private credit by banks as percentage of GDP, and money supply (M2) as percentage of GDP; and a standard proxy for poverty reduction namely: the household final consumption expenditure per capita growth (annual percentage). The study found a bidirectional causal flow between financial development and poverty reduction, implying that the causal flow between these important variables is independent of the proxy for financial development. This means that financial sector reforms and poverty reduction programmes are more of “win-win” strategies in the case of China. Therefore policymakers in China should continue to implement robust financial sector reforms and poverty reduction strategies.

Keywords: Financial Development; Poverty Reduction; Toda-Yamamoto Test; China (search for similar items in EconPapers)
JEL-codes: C32 E44 I32 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-cna, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/78922/1/MPRA_paper_78922.pdf original version (application/pdf)

Related works:
Journal Article: Does Financial Development Lead to Poverty Reduction in China? Time Series Evidence (2017)
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:pra:mprapa:78922

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().