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Finance-Growth Nexus Revisited: Empirical Evidence from Six Countries

Finance-Growth Nexus Revisited: Empirical Evidence from Six Countries AbstractThis paper investigates the dynamic causal relationship between bank-based financial development and economic growth, and between market-based financial development and economic growth in six countries during the period from 1980 to 2012. The causal relationship was found to vary largely across countries and over time. In general, bank-based financial development seems to Granger-cause economic growth in the UK and only in the long run in Australia. However, there is a feedback loop in Brazil and Australia, but only in the short run for the latter. In Kenya, South Africa and USA, the results support the neutrality hypothesis. The study results further indicate short-run unidirectional causality from market-based financial development to economic growth in the USA. Evidence of the feedback loop was found in Kenya, while the demand-following hypothesis found support only in South Africa and Brazil. However, the neutrality view was supported in Australia and the UK. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Scientific Annals of Economics and Business de Gruyter

Finance-Growth Nexus Revisited: Empirical Evidence from Six Countries

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Publisher
de Gruyter
Copyright
© 2018 Sheilla Nyasha et al., published by Sciendo
eISSN
2501-3165
DOI
10.2478/saeb-2018-0021
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper investigates the dynamic causal relationship between bank-based financial development and economic growth, and between market-based financial development and economic growth in six countries during the period from 1980 to 2012. The causal relationship was found to vary largely across countries and over time. In general, bank-based financial development seems to Granger-cause economic growth in the UK and only in the long run in Australia. However, there is a feedback loop in Brazil and Australia, but only in the short run for the latter. In Kenya, South Africa and USA, the results support the neutrality hypothesis. The study results further indicate short-run unidirectional causality from market-based financial development to economic growth in the USA. Evidence of the feedback loop was found in Kenya, while the demand-following hypothesis found support only in South Africa and Brazil. However, the neutrality view was supported in Australia and the UK.

Journal

Scientific Annals of Economics and Businessde Gruyter

Published: Sep 1, 2018

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