Financial Development and Economic Growth: Time Series Evidence from Egypt

Abu-Bader, Suleiman and Abu-Qarn, Aamer (2005): Financial Development and Economic Growth: Time Series Evidence from Egypt. Published in: Journal of Policy Modeling , Vol. 30, No. 5 (2008): pp. 887-898.

Abstract

This paper examines the causal relationship between financial development and economic growth in Egypt during the period 1960-2001 within a trivariate VAR setting. We employ four different measures of financial development and apply Granger causality tests using the cointegration and vector error correction methodology. Our results significantly support the view that financial development Granger-causes economic growth either through increasing investment efficiency or through increasing resources for investment. This finding suggests that the financial reforms launched in 1990 can explain the rebound in economic performance since then and that further deepening of the financial sector is an important instrument to stimulate saving/investment and therefore long-term economic growth.

• Item Type: MPRA Paper
• Institution: Department of Economics, Ben-Gurion University of the Negev
• Language: English
• Keywords: Financial development; Economic growth; Egypt; Granger causality; Error-correction models; Cointegration
• Subjects: G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation; O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation