Financial development and economic growth: an egg-and-chicken problem?

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Shan, Jordan, Morris, Alan G and Sun, Fiona (2001) Financial development and economic growth: an egg-and-chicken problem? Review of international economics, 9 (3). pp. 443-454. ISSN 0965-7576


This study uses a Granger causality procedure to investigate the relationship between financial development and economic growth. The authors estimate a vector autoregression (VAR) model for nine OECD countries and China. They argue that a time-series approach is superior to a cross-sectional one and that the VAR framework avoids technical problems common in other time-series models. Evidence is presented of bidirectional causality between financial development and growth in half of the countries and reverse causality in three others. There is little support for the hypothesis that finance "leads" growth, and caution must be exercised in making general conclusions about this relationship.

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Item type Article
DOI 10.1111/1467-9396.00291
Official URL
Subjects Historical > RFCD Classification > 340000 Economics
Historical > Faculty/School/Research Centre/Department > School of Economics and Finance
Keywords financial institutions, economic development
Citations in Scopus 133 - View on Scopus
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