Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis

Laurent Cavenaile, Christian Gengenbach and Franz Palm

CREPP Working Papers from Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège

Abstract: The aim of this paper is to investigate the long run relationship between the development of banks and stock markets and economic growth. We make use of the Groen and Kleibergen (2003) panel cointegration methodology to test the number of cointegrating vectors among these three variables for 5 developing countries. In addition, we test the direction of potential causality between financial and economic development. Our results conclude to the existence of a single cointegrating vector between financial development and growth and of causality going from financial development to economic growth. We find little evidence of reverse causation as well as bi-directional causality.

Date: 2011
New Economics Papers: this item is included in nep-ban and nep-fdg
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Related works:
Journal Article: Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis (2014)
Working Paper: Stock Markets, Banks and Long Run Economics Growth: A Panel Cointegration-Based Analysis (2013)
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