Research Article
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Causal Relationship Between Financial Development and Economic Growth: The Case of G7 Countries

Year 2019, Volume: 21 Issue: 3, 888 - 898, 30.09.2019
https://doi.org/10.32709/akusosbil.523505

Abstract

The causal
relationship between financial development and economic growth is one of the interesting
topics in recent years. However, there is no consensus on the direction of the
relationship and the indicators representing financial development. In this
context, the main purpose of this study is to examine the causality between
financial development and economic growth in the G7 countries during the period
of 2005-2015. From this point of view, financial development is evaluated under
three different categories; depth, efficiency and legal regulations. In each
category, there exist different variables representing financial development.
Therefore, a separate index is constructed for each main group using Principal
Component Analysis. Panel Vector Correction Model results demonstrated that
there is one-way causal relationship from financial development which is
measured by three indices to economic growth. Nevertheless, it is ascertained
that there is bi-directional causal relationship between only efficiency index
out of three indices and economic growth in the short-term. All in all, it can
be said that the direction of the relationship between financial development
and economic growth is from financial development to economic growth for G7
countries and it takes time for the developments in the financial markets to
reflect on economic growth.

References

  • Abu-Bader, S. ve Abu-Qarn, A. S. (2008). Financial Development and Economic Growth: The Egyptian Experience. Journal of Policy Modeling, 30(5): 887-898.
  • Adu, G., Marbuah, G. ve Mensah, J. T. (2013). Financial Development and Economic Growth in Ghana: Does the Measure of Financial Development Matter?. Review of Development Finance, 3(4): 192-203.
  • Afşar, A. (2007). Finansal Gelişme ile Ekonomik Büyüme Arasındaki İlişki. Muhasebe Finansman Dergisi, 36: 188-198.
  • Altıntaş, H. ve Ayrıçay, Y. (2010). Türkiye’de Finansal Gelişme ve Ekonomik Büyüme İlişkisinin Sınır Testi Yaklaşımıyla Analizi: 1987–2007, Anadolu University Journal of Social Science, 10(2): 71-98.
  • Al-Yousif, Y. K. (2002). Financial Development and Economic Growth: Another Look at the Evidence from Developing Countries. Review of Financial Economics, 11(2): 131-150.
  • Antonios, A. (2010). Stock Market and Economic Growth: An Empirical Analysis for Germany. Business and Economics Journal, 2010(1):1-12.
  • Anwar, S. ve Sun, S. (2011). Financial Development, Foreign Investment and Economic Growth in Malaysia. Journal of Asian Economics, 22(4): 335-342.
  • Apergis, N., Filippidis, I. ve Economidou, C. (2007). Financial Deepening and Economic Growth Linkages: A Panel Data Analysis. Review of World Economics, 143(1): 179-198.
  • Aras, G. ve Müslümov A. (2003). Sermaye Piyasalarının Gelişmesinde Kurumsal Yatırımcıların Rolü: OECD Ülkeleri ve Türkiye, İstanbul: Kurumsal Yatırımcı Yönetici Derneği.
  • Aslan, Ö. ve Küçükaksoy, İ. (2006). Finansal Gelişme ve Ekonomik Büyüme İlişkisi: Türkiye Ekonomisi Üzerine Ekonometrik Bir Uygulama. Ekonometri ve İstatistik e-Dergisi, 4: 25-38.
  • Bayar, Y., Kaya, A. ve Yıldırım, M. (2014). Effects of Stock Market Development on Economic Growth: Evidence from Turkey. International Journal of Financial Research, 5(1): 93-100.
  • Beck, T. Levine, R. ve Loayza, N. (2000). Finance and the Sources of Growth. Journal of Financial Economics, 58(1-2): 261-300.
  • Bittencourt, M. (2012). Financial Development and Economic Growth In Latin America: Is Schumpeter Right?. Journal of Policy Modeling, 34(3): 341-355.
  • Blackburn, K. ve Hung, V. T. (1998). A Theory of Growth, Financial Development and Trade. Economica, 65(257): 107-124.
  • Calderón, C. ve Liu, L. (2003). The Direction of Causality between Financial Development and Economic Growth. Journal of Development Economics, 72(1): 321-334.
  • Chang, T. (2002). Financial Development and Economic Growth in Mainland China: A Note on Testing Demand-Following or Supply-Leading Hypothesis. Applied Economics Letters, 9(13): 869-873.
  • Christopoulos, D. K. ve Tsionas, E. G. (2004). Financial Development and Economic Growth: Evidence from Panel Unit Root and Cointegration Tests. Journal of Development Economics, 73(1): 55-74.
  • Coban, S. ve Topcu, M. (2013). The Nexus between Financial Development and Energy Consumption in the EU: A Dynamic Panel Data Analysis. Energy Economics, 39: 81-88.
  • Cojocaru, L. F., Evangelos M., Hoffman, S. D. ve Miller, J. B. (2016). Financial System Development and Economic Growth in Transition Economies: New empirical Evidence from the CEE and CIS Countries. Emerging Markets Finance and Trade, 52(1): 223-236.
  • Demetriades, P. O. ve Hussein, K. A. (1996). Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries. Journal of Development Economics, 51(2): 387-411.
  • Demirguc-Kunt, A. (2006). Finance and Economic Development: Policy Choices for Developing Countries, Washington DC: World Ban.
  • Habibullah, M. S. ve Eng, Y. (2006). Does Financial Development Cause Economic Growth? A Panel Data Dynamic Analysis For The Asian Developing Countries. Journal of the Asia Pacific Economy, 11(4): 377-393.
  • Halicioglu, F. (2007). The Financial Development and Economic Growth Nexus for Turkey (No. 06/2007). EERI Research Paper Series.
  • Hassan, M. K., Sanchez, B. ve Yu, J. (2011). Financial Development and Economic Growth: New Evidence from Panel Data. The Quarterly Review of Economics and Finance, 51(1): 88-104.
  • Honohan, P. (2004). Financial Development, Growth And Poverty: How Close Are The Links?, In Financial Development and Economic Growth (Ed. C. A. E. Goodhart), London: Palgrave Macmillan.
  • Im K. S., Pesaran M. H. ve Shin Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 115(1): 53-74.
  • Kandil, M., Shahbaz, M., Mahalik, M. ve Nguyen, D. (2017). The Drivers of Economic Growth in China and India: Globalization or Financial Development?. International Journal of Development Issues, 16(1): 54-84.
  • Kandır, S. Y., İskenderoğlu, Ö. ve Önal, Y. B. (2007). Gelişme ve Ekonomik Büyüme Arasındaki İlişkinin Araştırılması, Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 16(2): 311-326.
  • Kar, M., Pentecost, E. J. (2000). Financial Development and Economic Growth in Turkey: Further Evidence on the Causality Issue. Centre for International, Financial and Economics Research, Department of Economics (Loughborough University), Economic Research Paper No. 00/27.
  • Kar, M., Nazlıoğlu, Ş. ve Ağır, H. (2014). Trade Openness, Financial Development and Economic Growth in Turkey: Linear and Nonlinear Causality Analysis. Journal of BRSA Banking & Financial Markets, 8(1): 63-86.
  • Karaca, O. (2012). Finansal Gelişme ve Ekonomik Büyüme: Türkiye İçin Bir Nedensellik Analizi. Journal of BRSA Banking & Financial Markets, 6(2): 85-111.
  • Kaya, A. (2014). Menkul Kıymet Piyasaları Ekonomik Büyümenin Bir Dinamiği Midir? Gelişmiş ve Gelişmekte Olan Ülkelere Yönelik Panel Veri Analizi. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 28(4): 285-306.
  • Kemal, A. R., Qayyum, A. ve Hanif, M. N. (2007). Financial Development and Economic Growth: Evidence from a Heterogeneous Panel of High Income Countries. The Lahore Journal of Economics, 12(1): 1-34.
  • King, R. G. ve Levine, R. (1993). Finance and Growth: Schumpeter Might be Right. Quarterly Journal of Economics, 108(3): 717–738.
  • Lee, J. (2005). Financial Intermediation and Economic Growth Evidence from Canada. New York: Eastern Economics Association.
  • Levin, A., Lin, C. ve Chu, C. J. (2002). Unit Root Tests in Panel Data: Asymptotic and Finitesample Properties. Journal of Econometrics, 108(1): 1-24.
  • Levine, R. ve Zervos, S. (1998). Stock Markets, Banks, and Economic Growth. American Economic Review, 88(3): 537-558.
  • Levine, R. (1997). Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature, 35(2): 688-726.
  • Liang, Q. ve Jian-Zhou, T. (2006). Financial Development and Economic Growth: Evidence from China. China Economic Review, 17(4): 395-411.
  • Lucas, R. E. (1988). On The Mechanics of Economic Development. Journal of Monetary Economics, 22(1): 3-42.
  • Menyah, K., Nazlıoğlu, S. ve Wolde-Rufael, Y. (2014). Financial Development, Trade Openness and Economic Growth in African Countries: New Insights from a Panel Causality Approach. Economic Modelling, 37: 386-394.
  • Narayan, P. K. ve Narayan, S. (2013). The Short-Run Relationship Between The Financial System And Economic Growth: New Evidence From Regional Panels. International Review of Financial Analysis, 29: 70-78.
  • Ona, S. (2017). Financial development and economic growth nexus in Russia. Russian Journal of Economics, 3(3): 321-332.
  • Öztürk, İ. (2008). Financial Development and Economic Growth: Evidence from Turkey. Applied Econometrics and International Development, 8(1): 85-98.
  • Özcan, B. ve Arı, A. (2011). Finansal Gelisme ve Ekonomik Büyüme Arasındaki İlişkinin Ampirik Bir Analizi: Türkiye Örneği. Business and Economics Research Journal, 2(1): 121-142.
  • Patrick, H. T. (1966). Financial Development and Economic Growth in Underdeveloped Countries. Economic Development and Cultural Change, 14(2): 174-189.
  • Paun, C. V., Musetescu, R. D., Topan, V. M. ve Danuletiu, D. C. (2019). The Impact of Financial Sector Development and Sophistication on Sustainable Economic Growth. Sustainability, 11, 1713.
  • Pedroni, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors. Oxford Bulletin of Economics and Statistics, 61(1): 653-670.
  • Robinson, J. (1952). The Rate of Interest and Other Essays, İçinde: The Generalization of the General Theory, London: MacMillan
  • Shan, J. ve Jianhong, Q. (2006). Does Financial Development ‘Lead’ Economic Growth? The Case of China. Annals of Economics and Finance, 1: 197–216.
  • Zang, H. ve Kim, Y. C. (2007). Does Financial Development Precede Growth? Robinson and Lucas Might Be Right. Applied Economics Letters, 14(1): 15-19.
  • Vazakidis, A. ve Adamopoulos, A. (2011). Financial Development and Economic Growth: An Empirical Analysis for the UK. European Research Studies Journal, 14(2): 135-148.

Finansal Gelişme ve Ekonomik Büyüme Arasındaki Nedensellik İlişkisi: G7 Ülkeleri Örneği

Year 2019, Volume: 21 Issue: 3, 888 - 898, 30.09.2019
https://doi.org/10.32709/akusosbil.523505

Abstract

Finansal gelişme ile ekonomik büyüme arasındaki
nedensellik ilişkisi son dönemin ilgi çeken konularındandır. Ancak yapılan
çalışmalarda hem ilişkinin yönü hem de finansal gelişmeyi temsil eden
göstergeler üzerinde bir görüş birliği bulunmamaktadır. Bu bağlamda çalışmanın
temel amacı, 2005-2015 döneminde G7 ülkelerinde finansal gelişme ile ekonomik
büyüme arasındaki nedensellik ilişkisinin incelenmesidir. Bu noktadan hareketle
çalışmada finansal gelişme; derinlik, etkinlik ve yasal düzenlemeler olmak
üzere üç farklı kategori altında incelenmiştir. Her bir kategoride finansal
gelişmeyi temsil eden farklı değişkenler bulunmaktadır. Bu nedenle, Temel
Bileşenler Analizi kullanılarak her bir başlık için ayrı birer endeks
oluşturulmuştur. Panel Vektör Düzeltme Modeli sonuçları, uzun dönemde üç endeks
ile ölçülen finansal gelişmeden ekonomik büyümeye doğru tek yönlü bir
nedensellik ilişkisinin olduğunu ortaya çıkarmıştır. Bununla birlikte, kısa
dönemde üç endeksten sadece etkinlik endeksi ile ekonomik büyüme arasında
karşılıklı bir nedensellik ilişkisinin olduğu tespit edilmiştir. Sonuçlar bir
bütün olarak değerlendirildiğinde, G7 ülkelerinde finansal gelişme ile ekonomik
büyüme arasındaki ilişkinin finansal gelişmeden ekonomik büyümeye doğru olduğu,
finansal piyasalarda yaşanan gelişmelerin ekonomik büyüme üzerindeki
yansımalarının zaman aldığı söylenebilir.

References

  • Abu-Bader, S. ve Abu-Qarn, A. S. (2008). Financial Development and Economic Growth: The Egyptian Experience. Journal of Policy Modeling, 30(5): 887-898.
  • Adu, G., Marbuah, G. ve Mensah, J. T. (2013). Financial Development and Economic Growth in Ghana: Does the Measure of Financial Development Matter?. Review of Development Finance, 3(4): 192-203.
  • Afşar, A. (2007). Finansal Gelişme ile Ekonomik Büyüme Arasındaki İlişki. Muhasebe Finansman Dergisi, 36: 188-198.
  • Altıntaş, H. ve Ayrıçay, Y. (2010). Türkiye’de Finansal Gelişme ve Ekonomik Büyüme İlişkisinin Sınır Testi Yaklaşımıyla Analizi: 1987–2007, Anadolu University Journal of Social Science, 10(2): 71-98.
  • Al-Yousif, Y. K. (2002). Financial Development and Economic Growth: Another Look at the Evidence from Developing Countries. Review of Financial Economics, 11(2): 131-150.
  • Antonios, A. (2010). Stock Market and Economic Growth: An Empirical Analysis for Germany. Business and Economics Journal, 2010(1):1-12.
  • Anwar, S. ve Sun, S. (2011). Financial Development, Foreign Investment and Economic Growth in Malaysia. Journal of Asian Economics, 22(4): 335-342.
  • Apergis, N., Filippidis, I. ve Economidou, C. (2007). Financial Deepening and Economic Growth Linkages: A Panel Data Analysis. Review of World Economics, 143(1): 179-198.
  • Aras, G. ve Müslümov A. (2003). Sermaye Piyasalarının Gelişmesinde Kurumsal Yatırımcıların Rolü: OECD Ülkeleri ve Türkiye, İstanbul: Kurumsal Yatırımcı Yönetici Derneği.
  • Aslan, Ö. ve Küçükaksoy, İ. (2006). Finansal Gelişme ve Ekonomik Büyüme İlişkisi: Türkiye Ekonomisi Üzerine Ekonometrik Bir Uygulama. Ekonometri ve İstatistik e-Dergisi, 4: 25-38.
  • Bayar, Y., Kaya, A. ve Yıldırım, M. (2014). Effects of Stock Market Development on Economic Growth: Evidence from Turkey. International Journal of Financial Research, 5(1): 93-100.
  • Beck, T. Levine, R. ve Loayza, N. (2000). Finance and the Sources of Growth. Journal of Financial Economics, 58(1-2): 261-300.
  • Bittencourt, M. (2012). Financial Development and Economic Growth In Latin America: Is Schumpeter Right?. Journal of Policy Modeling, 34(3): 341-355.
  • Blackburn, K. ve Hung, V. T. (1998). A Theory of Growth, Financial Development and Trade. Economica, 65(257): 107-124.
  • Calderón, C. ve Liu, L. (2003). The Direction of Causality between Financial Development and Economic Growth. Journal of Development Economics, 72(1): 321-334.
  • Chang, T. (2002). Financial Development and Economic Growth in Mainland China: A Note on Testing Demand-Following or Supply-Leading Hypothesis. Applied Economics Letters, 9(13): 869-873.
  • Christopoulos, D. K. ve Tsionas, E. G. (2004). Financial Development and Economic Growth: Evidence from Panel Unit Root and Cointegration Tests. Journal of Development Economics, 73(1): 55-74.
  • Coban, S. ve Topcu, M. (2013). The Nexus between Financial Development and Energy Consumption in the EU: A Dynamic Panel Data Analysis. Energy Economics, 39: 81-88.
  • Cojocaru, L. F., Evangelos M., Hoffman, S. D. ve Miller, J. B. (2016). Financial System Development and Economic Growth in Transition Economies: New empirical Evidence from the CEE and CIS Countries. Emerging Markets Finance and Trade, 52(1): 223-236.
  • Demetriades, P. O. ve Hussein, K. A. (1996). Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries. Journal of Development Economics, 51(2): 387-411.
  • Demirguc-Kunt, A. (2006). Finance and Economic Development: Policy Choices for Developing Countries, Washington DC: World Ban.
  • Habibullah, M. S. ve Eng, Y. (2006). Does Financial Development Cause Economic Growth? A Panel Data Dynamic Analysis For The Asian Developing Countries. Journal of the Asia Pacific Economy, 11(4): 377-393.
  • Halicioglu, F. (2007). The Financial Development and Economic Growth Nexus for Turkey (No. 06/2007). EERI Research Paper Series.
  • Hassan, M. K., Sanchez, B. ve Yu, J. (2011). Financial Development and Economic Growth: New Evidence from Panel Data. The Quarterly Review of Economics and Finance, 51(1): 88-104.
  • Honohan, P. (2004). Financial Development, Growth And Poverty: How Close Are The Links?, In Financial Development and Economic Growth (Ed. C. A. E. Goodhart), London: Palgrave Macmillan.
  • Im K. S., Pesaran M. H. ve Shin Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 115(1): 53-74.
  • Kandil, M., Shahbaz, M., Mahalik, M. ve Nguyen, D. (2017). The Drivers of Economic Growth in China and India: Globalization or Financial Development?. International Journal of Development Issues, 16(1): 54-84.
  • Kandır, S. Y., İskenderoğlu, Ö. ve Önal, Y. B. (2007). Gelişme ve Ekonomik Büyüme Arasındaki İlişkinin Araştırılması, Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 16(2): 311-326.
  • Kar, M., Pentecost, E. J. (2000). Financial Development and Economic Growth in Turkey: Further Evidence on the Causality Issue. Centre for International, Financial and Economics Research, Department of Economics (Loughborough University), Economic Research Paper No. 00/27.
  • Kar, M., Nazlıoğlu, Ş. ve Ağır, H. (2014). Trade Openness, Financial Development and Economic Growth in Turkey: Linear and Nonlinear Causality Analysis. Journal of BRSA Banking & Financial Markets, 8(1): 63-86.
  • Karaca, O. (2012). Finansal Gelişme ve Ekonomik Büyüme: Türkiye İçin Bir Nedensellik Analizi. Journal of BRSA Banking & Financial Markets, 6(2): 85-111.
  • Kaya, A. (2014). Menkul Kıymet Piyasaları Ekonomik Büyümenin Bir Dinamiği Midir? Gelişmiş ve Gelişmekte Olan Ülkelere Yönelik Panel Veri Analizi. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 28(4): 285-306.
  • Kemal, A. R., Qayyum, A. ve Hanif, M. N. (2007). Financial Development and Economic Growth: Evidence from a Heterogeneous Panel of High Income Countries. The Lahore Journal of Economics, 12(1): 1-34.
  • King, R. G. ve Levine, R. (1993). Finance and Growth: Schumpeter Might be Right. Quarterly Journal of Economics, 108(3): 717–738.
  • Lee, J. (2005). Financial Intermediation and Economic Growth Evidence from Canada. New York: Eastern Economics Association.
  • Levin, A., Lin, C. ve Chu, C. J. (2002). Unit Root Tests in Panel Data: Asymptotic and Finitesample Properties. Journal of Econometrics, 108(1): 1-24.
  • Levine, R. ve Zervos, S. (1998). Stock Markets, Banks, and Economic Growth. American Economic Review, 88(3): 537-558.
  • Levine, R. (1997). Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature, 35(2): 688-726.
  • Liang, Q. ve Jian-Zhou, T. (2006). Financial Development and Economic Growth: Evidence from China. China Economic Review, 17(4): 395-411.
  • Lucas, R. E. (1988). On The Mechanics of Economic Development. Journal of Monetary Economics, 22(1): 3-42.
  • Menyah, K., Nazlıoğlu, S. ve Wolde-Rufael, Y. (2014). Financial Development, Trade Openness and Economic Growth in African Countries: New Insights from a Panel Causality Approach. Economic Modelling, 37: 386-394.
  • Narayan, P. K. ve Narayan, S. (2013). The Short-Run Relationship Between The Financial System And Economic Growth: New Evidence From Regional Panels. International Review of Financial Analysis, 29: 70-78.
  • Ona, S. (2017). Financial development and economic growth nexus in Russia. Russian Journal of Economics, 3(3): 321-332.
  • Öztürk, İ. (2008). Financial Development and Economic Growth: Evidence from Turkey. Applied Econometrics and International Development, 8(1): 85-98.
  • Özcan, B. ve Arı, A. (2011). Finansal Gelisme ve Ekonomik Büyüme Arasındaki İlişkinin Ampirik Bir Analizi: Türkiye Örneği. Business and Economics Research Journal, 2(1): 121-142.
  • Patrick, H. T. (1966). Financial Development and Economic Growth in Underdeveloped Countries. Economic Development and Cultural Change, 14(2): 174-189.
  • Paun, C. V., Musetescu, R. D., Topan, V. M. ve Danuletiu, D. C. (2019). The Impact of Financial Sector Development and Sophistication on Sustainable Economic Growth. Sustainability, 11, 1713.
  • Pedroni, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors. Oxford Bulletin of Economics and Statistics, 61(1): 653-670.
  • Robinson, J. (1952). The Rate of Interest and Other Essays, İçinde: The Generalization of the General Theory, London: MacMillan
  • Shan, J. ve Jianhong, Q. (2006). Does Financial Development ‘Lead’ Economic Growth? The Case of China. Annals of Economics and Finance, 1: 197–216.
  • Zang, H. ve Kim, Y. C. (2007). Does Financial Development Precede Growth? Robinson and Lucas Might Be Right. Applied Economics Letters, 14(1): 15-19.
  • Vazakidis, A. ve Adamopoulos, A. (2011). Financial Development and Economic Growth: An Empirical Analysis for the UK. European Research Studies Journal, 14(2): 135-148.
There are 52 citations in total.

Details

Primary Language Turkish
Journal Section Law
Authors

İbrahim Yağlı 0000-0001-8985-0172

Ebru Topcu 0000-0003-3572-7552

Publication Date September 30, 2019
Submission Date February 6, 2019
Published in Issue Year 2019 Volume: 21 Issue: 3

Cite

APA Yağlı, İ., & Topcu, E. (2019). Finansal Gelişme ve Ekonomik Büyüme Arasındaki Nedensellik İlişkisi: G7 Ülkeleri Örneği. Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi, 21(3), 888-898. https://doi.org/10.32709/akusosbil.523505

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