Financial Developent and Economic Growth Nexus: Time Series Evidence from Middle Eastern and North African Countries

Abu-Bader, Suleiman and Abu-Qarn, Aamer (2006): Financial Developent and Economic Growth Nexus: Time Series Evidence from Middle Eastern and North African Countries. Published in: Review of Development Economics , Vol. 12, No. 4 (2008): pp. 803-817.

Abstract

This paper examines the causal relationship between financial development and economic growth in five Middle Eastern and North African (MENA) countries for different periods ranging from 1960 to 2004, within a trivariate vector autoregressive (VAR) framework. We employ four different measures of financial development and apply Granger causality tests using the cointegration and vector error-correction (VEC) methodology. Our empirical results show weak support for a long-run relationship between financial development and economic growth, and for the hypothesis that finance leads growth. In cases where cointegration was detected, Granger causality was either bidirectional or it ran from output to financial development.

• Item Type: MPRA Paper
• Institution: monaster center for economic research
• Language: English
• Keywords: Financial development; Economic growth; MENA; Granger causality; Error-correction models; Cointegration
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation

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