Growth Triggers in the European Union
Schriften des Instituts fuer Wirtschaftsforschung Halle, Band 15, "Advances in macroeconometric modeling", Papers and Proceedings of the 3rd IWH Workshop in Macroeconomics, pp. 205-237, Nomos, Baden-Baden, 2004
Posted: 19 Dec 2008 Last revised: 10 Feb 2011
Date Written: 2004
This paper examines the relationship between the development of the aggregate bond markets and real GDP in 10 EU economies. The recent interest in the ties between the real and the financial sector has usually been on the banking sector and the stock markets, rather ignoring the bond markets as a third essential source of external finance. We fill this gap by providing empirical evidence for causality patterns supporting the supply-leading approach in the UK, Germany, Austria, the Netherlands and Spain over the 1950 to 2000 period. In the cases of Finland and Italy we find evidence of interdependence between bond market capitalization growth and real output growth. Granger causality test and co-integration approach are employed to support this conjecture.
Keywords: bond markets, financial markets, economic development, Granger causality
JEL Classification: E44, O16, O40
Suggested Citation: Suggested Citation