Harb, Nasri and Al-Awad, Mouawiya (2005): Financial Development and Economic Growth in the Middle East. Published in: Applied Financial Economics , Vol. 15, No. 15 (2005): pp. 1041-1051.
Download (188kB) | Preview
This paper investigates the linkages between financial development and economic growth in the Middle East using newly developed methods of panel cointegration along with the popular time series methodologies such as the Johansen's cointegration, Granger causality, and the variance decompositions. The results indicate that, in the long run financial development and economic growth may be related to some level. In the short run, the panel causality tests point to real economic growth as the force that drives changes in financial development while individual countries' causality tests fail to give a clear evidence of the direction of causations.
|Item Type:||MPRA Paper|
|Original Title:||Financial Development and Economic Growth in the Middle East|
|Keywords:||Financial Development; Economic Growth; Panel 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 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
|Depositing User:||Nasri Harb|
|Date Deposited:||24. Feb 2009 14:35|
|Last Modified:||12. Feb 2013 01:36|
Beck T., R. Levine, and N. Loayza , Finance and the Source of Growth, Journal of Financial Economics 58, 261-300.
Berthelemy, J. and Varoudakis, A. , Economic Growth, Convergence Clubs, and the Role of Financial Development, Oxford Economic Papers, 48, 300-28.
Cheung, Y. and K. Lai , Finite-Sample Sizes of Johansen’s Likelihood Ratio for Cointegration, Oxford Bulletin of Economics and Statistics 55, 313-28.
Demetriades, P. and K. Hussein , Financial Development and Economic Growth: Cointegration and Causality Tests for 16 Countries, Journal of Development Economics 51, 387-411.
Dickey, D. and W. Fuller , Distribution of Estimators for Autoregressive Time Series with a Unit Root, Journal of the American Statistical Association 74, 427–431.
Dickey, D. and W. Fuller , Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root, Econometrica 49, 1057–1072.
Granger, C. , Investigating Causal Relationships by Econometric Models and Cross-Spectral Models, Econometrica 37, 424-438.
Granger, C. , Some Properties of Time Series Data and their Use in Econometric Model Specification, Journal of Econometrics 11, 121–130.
Granger, C. , Some Recent Developments in the Concept of Causality, Journal of Econometrics 39, 199-211.
Granger, C. and A. Weiss , Time Series Analysis of Error-Correcting Models, in Studies in Econometrics, Time Series, and Multivariate Statistics (pp. 255–278), New York: Academic Press.
Greenwood, J. and S. Bruce , Financial Markets in Development, and the Development of Financial Markets, Journal of Economic Dynamics and Control 21, 145-81.
Gregorio J., and E. Guidotti , Financial Development and Economic Growth, World Development 23, 433-48.
Gupta, K. , Finance and Economic Growth in Developing Countries, London: Croom Helm.
Im, K., H. Pesaran, Y. Shin , Testing for Unit Roots in Heterogeneous Panels, DAE Working Paper, No. 9526, University of Cambridge.
Johansen, S. , Statistical Analysis of Cointegration Vectors, Journal of Economics Dynamics and Control 12, 231–254.
Johansen, S. , Estimation and Hypotheses Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models, Econometrics 59, 1151-1180.
Johansen, S. & K. Juselius , Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money, Oxford Bulletin of Economics and Statistics 52, 169–210.
King, R. and R. Levine , Finance, Entrepreneurship, and Growth: Theory and Evidence, Journal of Monetary Economics 32, 513-42.
Levin, A. and C. Lin , Unit Root Tests in Panel Data: New Results Discussion Paper, No. 93-56, University of California, San Diego.
Levine, R. , Financial Development and Economic Growth: Views and Agenda, Journal of Economic Literature 35, 688-726.
Levine, R., L. Norman and T. Beck , Financial Intermediation and Growth: Causality and Causes, Journal of Monetary Economic 46, 31-77.
Lucas, R. , On the Mechanics of Economic Development, Journal of Monetary Economics, July, 3-42.
Luintel, K. and M. Khan , A quantitative Reassessment of the Finance-Growth Nexus: Evidence from a Multivariate VAR, Journal of Development Economics 60, 381-405
Ndikumana, L. , Financial Determinants of Domestic Investment in Sub-Saharan Africa: Evidence from Panel Data, World Development 28, 381-400.
Neusser, K. and M. Kugler , Manufacturing Growth and Financial Development: Evidence from OECD Countries, Review of Economics and Statistics 80, 638-46.
Patrick, H. , Financial Development and Economic Growth in Underdeveloped Countries, Economic Development and Cultural Change 14, 147-189.
Pantula, S. , Tests for Unit Roots in Time Series Data, Econometric Theory 5, 256-71.
Pedroni, P. , Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis: New Results, unpublished manuscript, Indiana University.
Pedroni, P. , Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors, Oxford Bulletin of Economics and Statistics 61, 653-670.
Pedroni, P. , Fully Modified OLS for Heterogeneous Cointegrated Panels, Advanced in Econometrics, vol. 15, pp. 3-130.
Pedroni, P. , Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis, unpublished manuscript, Indiana University.
Pedroni, P. (Forthcoming): Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis, Econometric Theory.
Phillips, P. and Ouliaris, S. , Asymptotic Properties of Residual Based Tests for Cointegration, Econometrica 58, 165-193.
Pill, H. and M. Pradhan , Financial Indicators and Financial Change in Africa and Asia, IMF Working Paper 95/123, Washington: International Monetary Fund.
Quah, D. , International Patterns of Growth: Persistence in Cross-Country Disparities, unpublished manuscript, London School of Economics.
Quah, D. , Exploiting Cross-Section Variations for Unit Root Inference in Dynamic Data, Economic Letters, 44, 9-19.
Rother, P. , Explaining the Behavior of Financial Intermediation: Evidence from Transition Economies, IMF Working Paper 99/36, Washington: International Monetary Fund.
Xu, Z. , Financial Development, Investment, and Economic Growth,' Economic Inquiry 38, 311-44.