Financial development and economic growth: the experiences of selected OIC countries

The financial sector, the money and capital market, has developed so much to the extent that it’s been said as being in the transition continuously and there is always a demand for it. The financial system keeps changing and within a year, various types of new financial tools being introduced in...

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Main Author:	Duasa, Jarita
Format:	Article
Language:	English English
Published:	Faculty of Economics and Management, Universiti Putra Malaysia 2014
Subjects:	HB Economic Theory HG Finance
Online Access:	http://irep.iium.edu.my/43955/ http://irep.iium.edu.my/43955/ http://irep.iium.edu.my/43955/1/43955_Financial%20Development.pdf http://irep.iium.edu.my/43955/2/43955_Financial%20Development_scopus.pdf

id	iium-43955
recordtype	eprints
spelling	iium-439552017-09-20T08:22:37Z http://irep.iium.edu.my/43955/ Financial development and economic growth: the experiences of selected OIC countries Duasa, Jarita HB Economic Theory HG Finance The financial sector, the money and capital market, has developed so much to the extent that it’s been said as being in the transition continuously and there is always a demand for it. The financial system keeps changing and within a year, various types of new financial tools being introduced in the market. Moreover, the size of transaction taking place is so large, that it could affects the economy positively. If financial development causes economic growth, this is in line with the “supply-leading” views, whereas if economic growth causes financial development, then it is suitable with the “demand-following” views. Focusing on selected OIC countries, the present study aims to investigate the impact of financial development on economic growth or vice versa, in respective countries. Data collected are ranging from 1960-2005 for each country and only countries which have sufficient data (minimum of 30 years) are selected and used in the analysis. Base on this, we select the following countries in this study: Bahrain, Egypt, Iran, Jordan, Kuwait, Libya, Malaysia, Pakistan, and Saudi Arabia. Using vector autoregressive model (VAR) and vector error correction model (VECM), the above hypotheses are re-examined concerning the relationship between financial development and economic growth. The study finds that for Malaysia and Egypt, there is bi-directional causality between financial development and economic growth. Results on Iran and Jordan indicate unidirectional causality which supports the “demand-following” views, while Bahrain, Kuwait, Libya, Pakistan and Saudi Arabia signify no exact Granger-causality relationship between the two variables. In addition, with the VECM results, the error correction terms for Jordan and Kuwait are found to be significant, implying that there is a long run relationship between variable in at least one direction for each country. Faculty of Economics and Management, Universiti Putra Malaysia 2014 Article PeerReviewed application/pdf en http://irep.iium.edu.my/43955/1/43955_Financial%20Development.pdf application/pdf en http://irep.iium.edu.my/43955/2/43955_Financial%20Development_scopus.pdf Duasa, Jarita (2014) Financial development and economic growth: the experiences of selected OIC countries. International Journal of Economics and Management, 8 (1). pp. 215-228. ISSN 1823-836X http://econ.upm.edu.my/ijem
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	HB Economic Theory HG Finance
spellingShingle	HB Economic Theory HG Finance Duasa, Jarita Financial development and economic growth: the experiences of selected OIC countries
description	The financial sector, the money and capital market, has developed so much to the extent that it’s been said as being in the transition continuously and there is always a demand for it. The financial system keeps changing and within a year, various types of new financial tools being introduced in the market. Moreover, the size of transaction taking place is so large, that it could affects the economy positively. If financial development causes economic growth, this is in line with the “supply-leading” views, whereas if economic growth causes financial development, then it is suitable with the “demand-following” views. Focusing on selected OIC countries, the present study aims to investigate the impact of financial development on economic growth or vice versa, in respective countries. Data collected are ranging from 1960-2005 for each country and only countries which have sufficient data (minimum of 30 years) are selected and used in the analysis. Base on this, we select the following countries in this study: Bahrain, Egypt, Iran, Jordan, Kuwait, Libya, Malaysia, Pakistan, and Saudi Arabia. Using vector autoregressive model (VAR) and vector error correction model (VECM), the above hypotheses are re-examined concerning the relationship between financial development and economic growth. The study finds that for Malaysia and Egypt, there is bi-directional causality between financial development and economic growth. Results on Iran and Jordan indicate unidirectional causality which supports the “demand-following” views, while Bahrain, Kuwait, Libya, Pakistan and Saudi Arabia signify no exact Granger-causality relationship between the two variables. In addition, with the VECM results, the error correction terms for Jordan and Kuwait are found to be significant, implying that there is a long run relationship between variable in at least one direction for each country.
format	Article
author	Duasa, Jarita
author_facet	Duasa, Jarita
author_sort	Duasa, Jarita
title	Financial development and economic growth: the experiences of selected OIC countries
title_short	Financial development and economic growth: the experiences of selected OIC countries
title_full	Financial development and economic growth: the experiences of selected OIC countries
title_fullStr	Financial development and economic growth: the experiences of selected OIC countries
title_full_unstemmed	Financial development and economic growth: the experiences of selected OIC countries
title_sort	financial development and economic growth: the experiences of selected oic countries
publisher	Faculty of Economics and Management, Universiti Putra Malaysia
publishDate	2014
url	http://irep.iium.edu.my/43955/ http://irep.iium.edu.my/43955/ http://irep.iium.edu.my/43955/1/43955_Financial%20Development.pdf http://irep.iium.edu.my/43955/2/43955_Financial%20Development_scopus.pdf
first_indexed	2023-09-18T21:02:31Z
last_indexed	2023-09-18T21:02:31Z
_version_	1777410718514020352

Financial development and economic growth: the experiences of selected OIC countries

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