Finance-Growth Nexus in Select Asian Countries

The IUP Journal of Applied Finance, Vol. 19, No. 3, July 2013, pp. 39-55

Posted: 21 Nov 2013

See all articles by Rudra Prakash Pradhan

Rudra Prakash Pradhan

Indian Institute of Technology (IIT)

Aadra Gunashekar

Indian Institute of Technology Kharagpur

Date Written: November 20, 2013

Abstract

The paper investigates the causal nexus between financial development and economic growth for 15 selected Asian countries for the period 1961-2010, using cointegration test and vector error correction model. The results suggest that in the case of Bangladesh, Sri Lanka and South Korea, financial development causes economic growth, whereas in the case of Bhutan, India, Pakistan, Malaysia, the Philippines and Singapore, economic growth causes financial development. The results further suggest that in the case of China, Hong Kong, Japan, Indonesia and Vietnam, there is a two-way causality between financial development and economic growth, while in the context of Thailand there is no causal link between the two. At the panel setting, the results reveal a unidirectional causality from economic growth to financial development in South Asia and Southeast Asia, while no sign of causality exists between financial development and economic growth in East Asia.

Suggested Citation

Pradhan, Rudra Prakash and Gunashekar, Aadra, Finance-Growth Nexus in Select Asian Countries (November 20, 2013). The IUP Journal of Applied Finance, Vol. 19, No. 3, July 2013, pp. 39-55, Available at SSRN: https://ssrn.com/abstract=2357373

Rudra Prakash Pradhan (Contact Author)

Indian Institute of Technology (IIT) ( email )

Kharagpur, 721302
India

Aadra Gunashekar

Indian Institute of Technology Kharagpur ( email )

Kharagpur
IIT Khragpur
IN
India

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