reveals a long-run causal relationship between financial development, trade . Trade Openness and Economic Growth: Evidence from Ghana, Nigeria and. The purpose of this study was to examine the causal relationship among financial development, trade openness and Economic Growth in Nigeria for the Financial Development and Economic Growth: The Case of Greek. unidirectional causality from economic growth to financial development, while strong link between financial markets development and trade openness opens up a .. development, trade openness and Economic Growth nexus in Nigeria.
The justifications for this study are, to provide further evidence by analyzing the causality between financial development and economic growth of Botswana for the period - This study differs from AkinboadeEita and Jordaan, by incorporating trade openness and foreign direct investment to investigate their causal relationship with growth.
Furthermore, Ogbonna, has conducted similar study for Nigeria and the results suggest that financial deepening granger cause economic growth without feedback and this study can serve for comparative analysis.
With the current estimated population of 1. Methodology Data and variable definition The data we have employed for Botswana economy are annual figures covering the period — Following Erdal, Okan and Behiye approach with some modifications, the variables are measured as follows: All the variables are expressed in natural logarithm for the usual statistical reasons except for domestic credit with negative values. Although it is a common practice among researchers to use cross-country regression in investigating the growth effect of financial development, it is as well pertinent to study evidence from individual-countries at least at a simple level.
For this reason, we follow the paths of Ogbonnakar and PentecostEita and Jordaan and, Erdal, Okan and Behiyewith some little modifications to enable us as well investigate the effects of foreign direct investment and trade openness. The model takes real GDP as the dependent variable and, financial development, trade openness and foreign direct investment as the explanatory variables as follows: Estimation Procedure The estimation procedure adopted in this study is in three sequences.
It might seem reasonable to test for the presence of a unit root in the series using the most general of the models as: Dickey and Fuller, ; Phillips and Perron, Empirical Results and Discussion In this section, we present the benchmark results of the significance of financial development in macro economic model as are derived from empirical estimation of equation 1. Unit Root Tests It is pertinent that we establish the time series properties of the employed variables for the period — Testing explicitly for the manifestations of non-stationary is of great essence in econometric analysis associated with time series data.
In one way, it serves the first step in exploring the status of the Data and in the other, because the presence of such non- stationary at times has important econometric implication. The Phillips-Perron tests procedures which compute a residual variance that is robust to auto-correlation are employed as an alternative to the ADF. It might seem reasonable to test for the existence of a unit root in the series using the most general of the models as: According to the ADF and PP tests results as presented in table 1, all the time-series variables appear to be stationary at least in their first difference, i.
The tests are performed using E-view econometric package version 6. Now, we use the Johansen and, Johansen and Juselius approaches to test for cointegration in the data series. Table 3 in the appendix reports the result from the cointegration tests. This suggests the existence of steady state long-run relationship between the dependent and independent variables employed in this study.
Trace Test for Cointegration Hypothesized Trace 0. The test is performed using Eview version 6. Granger Causality Test The main object of this study is to investigate the causal relationship between economic growth, financial deepening and trade openness. The null hypothesis, F-statistics and the p-values for each of the variables are as presented in table 3 below. The results identified unilateral relationship between: The results further reveal that the cause and effect relationship between real income and the ratio of deposit liability to nominal GDP is not significantly different from zero and thus inconsequential.
This is in line with some earlier findings in this regard see: These benchmark results suggest that for Botswana, real GDP granger cause domestic credit and foreign direct investment without feedback mechanism. This indicates short run relationship between real GDP and, domestic credit and foreign direct investment. As for real GDP and broad money supply, the results indicate that money supply granger cause real GDP with feedback mechanism through a tortuous process.
This is an indication of one steady state long run relationship between the variables as evidence in the trace test for cointegration. The test was carried out using E-view version 6. Concluding Remarks In this paper, the relationship between financial development, trade openness and economic growth in Botswana has been X-rayed for the period In order to see the impact of different aspects of financial development, three alternative financial development indicators are proposed.
The empirical results show that the direction of causality between financial development and economic growth is sensitive to the choice of measurement for financial development in Botswana. Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis.
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Benin exports its products mainly to France and, in smaller quantities, to the Netherlands, Korea, Japan, and India with France acting as the major source of its imports. Despite its rapid growth, the economy of Benin still remains underdeveloped and dependent on subsistence agriculture, cotton production, and regional trade. This paper explores the relationship between financial development, trade openness and economic growth in Benin Republic.
In economics, the effects of financial deepening on economic growth have always been an important issue of discuss.
Investigation about the factors that determine economic growth has been a major effort of economists in both developed and developing countries. Several explanations have been proposed, such as financial development, trade openness, capable legal system, impressive institutional framework, or education drive. In recent years, financial development and trade openness have received much attention in theoretical as well as empirical literature as a major determinant for economic growth Babak, Economists have accepted the fact that financial development effects economic growth but have expressed divergent opinion on the direction of causality, ie whether financial development causes economic growth or economic growth causes financial development.
Since the seminal work of Patrickwhich first postulated a bi-directional relationship between financial development and economic growth, a large empirical literature has emerged testing this hypothesis.
Furthermore, empirical literatures to examine the hypothesis for individual country using time series techniques abound, such as: The aim of this contribution is to investigate if financial deepening has actually influenced economic growth in Benin Republic in the past and whether trade liberalization strategies in this context constitute appropriate policy measures to foster economic growth in Benin. The emergence of the so-called new theories of endogenous economic growth has given a new thrust to the relationship between growth and financial deepening as these models postulate that savings behaviors directly influences not only equilibrium income levels but also growth rates.
Thus, financial markets can exhit a strong shock on real economic activity. In fact, in the views of Hermes, financial liberalization theory and new growth theories suppose that financial deepening foster economic growth. On the other hand, Murinde and EngLuintel and Khan argue that a member of endogenous growth models show a bi-directional relationship between financial deepening and economic growth.
The remainder of this contribution is structured as follows: Section 2 brief literature review, Section 3, methodology, Section 4 results and discussion, while section 5 presents the concluding remarks.
Brief Literature Review The whole array of literature on finance-growth relationship can be divided into two broad Categories: Financial sector transfers resources from the traditional low-growth sector for example agriculture and land rents to modern high growth sectors, and promotes and stimulates entrepreneurial responses in these modern sectors. This implies that creation of financial institutions and the supply of financial services are well in advance of demand for them, and the findings of McKinnonShawKing and Levinea, b, c support this proposition.
The financial system adapts itself to the financial needs of the real sector and fits in with its autonomous development, playing a relatively passive role in the growth process Berthelemy and Varoudakis The relationship between openness to international trade and economic growth, and financial development and economic growth are focus of economists Roubini and Sala-i- Martin, Generally, it is argued that openness to international trade and financial development has a positive impact on economic growth.
The reason for the argument is partly based on the conclusions of many empirical studies, which claim that outward- oriented economies consistently exhibit higher economic growth rates than inward- looking economies Tsen, It is also partly due to the failures of import-substitution strategies, particularly in the s and overstated expectations from trade liberalisation Yanikkaya, Although there is a near consensus about the positive impact of trade flow on economic growth, the theoretical economic growth literature, which studies the economic growth impact of trade restrictions, reports that the impact is very complicated in the most general case and the results are mixed as to how trade policies play a role in economic growth.
The fact that empirical studies describe openness to international trade very differently makes the classification of countries according to their level of openness to international trade a formidable task Yanikkaya, King and Levineamongst others, show the positive link between financial development and economic growth, and financial development has predictive power for future economic growth.
However, the empirical findings of the relationship between financial development and economic growth are inconclusive. Although the relationship between trade and growth has been the subject of a voluminous body of literature, there is a significant amount of disagreement on the direction of causality. Some studies have found that there is bi-directional causality between trade and growth, such as Chow and Anoruo and Ahmad No causal relationship has also been observed in some studies, see: Therefore, like finance-growth, trade-growth debate is still devoid of any single consensus.