The Finance-Growth Nexus in the High Performance Asian Economies: A Panel Bootstrap Causality Analysis

Authors : Dilek DURUSU ÇİFTÇİ

Pages : 495-514

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Publication Date : 2019-03-29

Article Type : Research Paper

Abstract :This study examines the causal link between financial development and economic growth in the High Performance Asian Economies insert ignore into journalissuearticles values(HPAEs);. The newly developed panel causality testing approach of Emirmahmutoglu and Kose insert ignore into journalissuearticles values(2011); which controls for both cross-sectional dependency and heterogeneity across countries is applied to the 7 HPAEs for the period 1989-2017. In order to capture the relationship between real sector development and both credit and stock market development, two different indicators are used. The panel findings indicate that the while there is two-way causal relationship between stock market development and economic growth, the causality exist only one-way from growth to credit market development. This implies that the demand-following hypothesis is supported in the panel of HPAEs. Moreover, the results show that the existence and direction of causality differ among the different HPAEs. These various evidences lead to country specific policy implications and recommendations.
Keywords : Economic growth, Financial development, Cross section dependency, Panel data models