Stock Markets, Banks and Long Run Economics Growth: A Panel Cointegration-Based Analysis

Arbeitspapier

The aim of this paper is to investigate the long run relationship between the development of banks and stock markets and economic growth. We make use of a Johansen-based panel cointegration methodology allowing for cross-country dependence to test the number of cointegrating vectors among these three variables for 5 developing countries. In addition, we test the direction of potential causality between financial and economic development. Our results conclude to the existence of a single cointegrating vector between financial development and growth and of causality going from financial development to economic growth. We find little evidence of reverse causation as well as bi-directional causality. We interpret this as evidence supporting the significance of financial development for economic development although banks and stock markets may have different effects depending on the level of economic development.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4513

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Financial Institutions and Services: General ; Institutions and Growth
• Subject: banks ; stock markets ; economic growth ; panel cointegration ; causality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cavenaile, Laurent ; Gengenbach, Christian ; Palm, Franz
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/89757
• Last update: 10.03.2025, 11:45 AM CET