Finance and Growth: Institutional Considerations and Causality

27 Pages Posted: 18 Nov 1997

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; University of the Basque Country

Panicos Demetriades

University of Leicester - Department of Economics

Abstract

This paper re-examines the question of causality between financial development and economic growth. We argue that recent results obtained from cross-section country studies are not able to address this issue satisfactorily. Drawing on the distinction between "bank-based" and "capital-market-based" financial systems and the literature on financial repression we also argue that country specific factors are likely to influence the causal nature of the relationship between financial development and economic growth; as a result this is expected to vary across countries. We conduct cointegration and causality tests using time series data for twelve representative countries which corroborate our analysis.

JEL Classification: O16, O23, E44

Suggested Citation

Arestis, Philip and Demetriades, Panicos O., Finance and Growth: Institutional Considerations and Causality. Available at SSRN: https://ssrn.com/abstract=35996 or http://dx.doi.org/10.2139/ssrn.35996

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

University of the Basque Country

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

Panicos O. Demetriades

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom
+ 44 116 252 2835 (Phone)
+ 44 116 252 2908 (Fax)

HOME PAGE: http://www.le.ac.uk/economics/staff/pd28.html

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