American Journal of Applied Mathematics and Statistics
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American Journal of Applied Mathematics and Statistics. 2014, 2(4), 185-192
DOI: 10.12691/ajams-2-4-2
Open AccessArticle

New Proxy of Financial Development and Economic Growth in Medium-Income Countries: A Bootstrap Panel Granger Causality Analysis

Khalil Mhadhbi1,

1Faculty of Economic Sciences and Management of Tunis

Pub. Date: June 12, 2014

Cite this paper:
Khalil Mhadhbi. New Proxy of Financial Development and Economic Growth in Medium-Income Countries: A Bootstrap Panel Granger Causality Analysis. American Journal of Applied Mathematics and Statistics. 2014; 2(4):185-192. doi: 10.12691/ajams-2-4-2

Abstract

This paper examines the causal relationship between financial development and economic growth for 27 medium-income countries in the period 1970 to 2012. We develop a new proxy for financial development that refers to the input of real resources into the financial system and apply the panel bootstrapped approach to Granger causality. The results show, for three countries the findings support strong evidence on supply-leading hypothesis which implies that financial development induces economic growth and for six countries the findings support strong evidence on demand-following. Our results confirm for twenty one countries suggesting that their financial development does not depend on economic growth.

Keywords:
causality financial development economic growth bootstrapping panel data

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