Does financial development 'lead' economic growth? A vector auto-regression appraisal

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Shan, Jordan (2005) Does financial development 'lead' economic growth? A vector auto-regression appraisal. Applied Economics, 37 (12). pp. 1353-1367. ISSN 0003-6846

Abstract

Using a Vector Autoregression (VAR) approach, several hypotheses are re-examined suggested by the literature concerning the relationship between financial development and economic growth, investment and productivity. The models use quarterly time-series data from ten OECD countries and China. Innovation accounting or variance decomposition and impulse response function analysis is applied to examine interrelationships between variables in the VAR system and, therefore, differs from the more usual Granger causality approach. In particular, it examines the relationship between financial development proxied by total credit. At best, weak support is found for the hypothesis that financial development 'leads' economic growth.

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Item type	Article
URI	https://vuir.vu.edu.au/id/eprint/2839
DOI	10.1080/00036840500118762
Official URL	http://tandfprod.literatumonline.com/doi/pdf/10.10...
Subjects	Historical > Faculty/School/Research Centre/Department > School of Economics and Finance Historical > FOR Classification > 1503 Business and Management
Keywords	ResPubID8794; hypothesis re-examination, Vector Autoregression system, financial development, economic growth, investment, productivity
Citations in Scopus	146 - View on Scopus
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