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Financial Development and Economic Growth in BRICS Countries and Turkey: A Panel Data Analysis

Year 2018, Volume: 5 Issue: 2, 1 - 17, 31.10.2018
https://doi.org/10.17336/igusbd.454878

Abstract

In the last few decades, although there have been many studies examined the relationship between financial development and economic growth, it seems that no consensus has been reached due to the diversity of variables and the methods used in the analyses. This article examines the relationship between financial development and economic growth (GDP) by using panel data analysis for BRICS Countries and Turkey. The analysis covers 21 years between 1996-2016. Variables used for financial development are Morgan Stanley Capital International Index (MSCI), Credits (CREDIT), money supply (BMONEY), foreign trade (TRADE). 

According to the result of the analysis; MSCI is the only variable that statistically significant and so affects GDP positively both in the long-term and the short-term. BMONEY and TRADE variables are statistically significant in the short-term, but not in the long-term. While TRADE affects GDP positively, BMONEY affects growth negatively in the short-term. CREDIT is not statistically significant neither in the short-term nor in the long-term. There is unidirectional causality from MSCI to GDP, from GDP to MBROAD, from MSCI to TRADE and from MBROAD to TRADE. There is not a causality between MBROAD and MSCI, while there is a bidirectional causality between TRADE and GDP. Therefore, it is not certain if financial growth is the determinant of economic growth for selected variables and the countries in the period of 1996-2016.

References

  • ABU-BADER, S. & ABU-QARN, A.S. (2008). Financial development and economic growth: the Egyptian experience. Journal of Policy Modeling, 30 (5), 887–898.
  • AKKAY, C. (2010). Finansal entegrasyon sürecinde dinansal gelişme ve ekonomik büyüme arasındaki nedenselliğin Türkiye açısından dönemsel olarak araştırılması. İstanbul Üniversitesi Sosyal Bilimler Dergisi, 2, 55–70.
  • AL-YOUSIF, Y.K. (2002). Financial development and economic growth: another look at the evidence from developing countries, Review of Financial Economics, vol. 11(2), 131-150
  • ARCAND, J., BERKES, E. & PANIZZA, U. (2012). Too much finance? IMF Working Paper: 12/161
  • ARTAN, S. (2007). The effects of financial development on growth: Literature and empirical evidence, İktisat İşletme ve Finans, Vol: 22(252), 70-89.
  • BECK, T. & LEVINE, R. (2004). Stock markets, banks and growth: panel evidence. Journal of Banking and Finance, Vol.28, 423-442.
  • BENCIVENGA, V. R., SMITH, B. D. & STARR, R. M. (1995). Transactions costs, technological choice, and endogenous growth, Journal of Economic Theory, 67(1), 53–177.
  • BENCIVENGA, V.R. & SMITH, B.D., (1991). Financial intermediation and endogenous growth. The Review of Economic Studies, Vol.58(2), 195-209.
  • CARLIN, W. & MAYER, C. (2003). Finance, investment, and growth. Journal of Financial Economics, Vol. 69, 191–226.
  • DEIDDA, L. & FATTOUH, B. (2002). Non-linearity between finance and growth. Economics Letters, Vol.74(3), 339-345.
  • GOLDSMITH, R.W.(1969). Financial structure and development. Yale University Press, New Haven, CT.
  • GREENWOOD, J. & SMITH, B.D. (1997). Financial markets in development, and the development of financial markets. Journal of Economic Dynamics and Control, Vol.21, 145-181.
  • GURLEY, J. G. & SHAW E.S. (1955). Financial aspects of economic development. The American Economic Review, Vol. 45(4), 515-538.
  • HASSAN M. K., SANCHEZ, B. & SUKYU, J. (2011). Financial development and economic growth: New evidence from panel data. The Quarterly Review of Economics and Finance, Vol.51(1), 88-104.
  • JAYARATNE, J. & STRAHAN P. E. (1996). The finance-growth nexus: Evidence from bank branch deregulation. The Quartely Journal of Economics, Vol.111(3), 639–670.
  • JUNG, W.S. (1986). Financial development and economic growth: International evidence. Economic Development and Cultural Change, Vol.34, 336-346.
  • KANDIR, S.Y., İSKENDEROĞLU, Ö. & ÖNAL, Y.B. (2007). Finansal gelişme ve ekonomik büyüme arasındaki ilişkinin araştırılması. Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, Vol:16/2, 311-326.
  • KANG, S.J. & Y. SAWADA (2000). Financial repression and external openness in an endogoneous growth model. Journal of International Trade and Economic Development, Vol.9(4), 427-443.
  • KAR, M. & PENTECOST E. J. (2000). Financial development and economic growth in Turkey: Further evidence on the causality Issue. Economic Research Department of Economics, Loughborough University. Paper No. 00/27.
  • KAR, M., NAZLIOGLU, S. & AGIR, H. (2011). Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis. Economic Modelling, Vol.28(1), 685-693.
  • KARAMELIKLI, H., & KESINGÖZ, H. (2017). Finansal gelişme bileşenlerinin ekonomik büyüme üzerindeki etkisi: Türkiye örneği, İnsan ve Toplum Bilimleri Araştırmaları Dergisi, Vol.6(1), 683-701.
  • KHAN, M. S. & SENHADJI, A. (2000). Financial development and economic growth: An overview. IMF Working Paper: 00/209.
  • KING, R.G. & LEVINE, R. (1993). Finance and growth: Schumpeter might be right. The Quarterly Journal of Economics, Vol.108(3), 717-737.
  • KOSE, M. A. & PRASAD, E. S. and TERRONES, M. E. (2006). How do trade and financial integration affect the relationship between growth and volatility? Journal of international Economics, 69(1), 176-202.
  • LEVINE R. & ZERVOS S. (1998). Stock market, banks and economic growth. American Economic Review, Vol.88, 537–558.
  • LEVINE R., LOAYZA N. and BECK T. (2000). Financial intermediation and growth: Causality and causes. Journal of Monetary Economics, Vol.46, 31-77.
  • LEVINE, R. (1997). Financial development and economic growth: views and agenda. Journal of Economic Literature, Vol.35(2), 688–726.
  • LOAYZA, N.V. & RANCIERE, R., (2006). Financial development, financial fragility, and growth. Journal of Money, Credit and Banking, Vol. 38(4), 1051-1076.
  • LUCAS, R. (1988). On the mechanics of economic development. Journal of Monetary Economics, Vol.22, 2-42.
  • MCKINNON, R. I. (1973). Money and capital in economic development. Oxford Press.
  • MENYAH, K., NAZLIOĞLU, Ş. & WOLDE-RUFAEL, Y. (2014). Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling, Vol.37, 386-394.
  • MISHKIN, F. S. (2007). Is financial globalization beneficial? Journal of Money, Credit and Banking, Vol.39(2-3), 259-294.
  • MOYO, C., KHOBAI, H., KOLISI, N., & MBEKI, Z.(2018). Financial development and economic growth in Brazil: a non-linear ARDL Aproach. MPRA Paper No.85252.
  • MUSLUMOV, A. & ARAS, G. (2002). Sermaye piyasası gelişmesi ve ekonomik büyüme arasında nedensellik ilişkileri: OECD ülkeleri örneği. İktisat İşletme ve Finans. Vol.17 (198), 90-100.
  • NDIKUMANA, L. ( 2005). Financial development, financial structure, and domestic investment: International evidence. Journal of International Money and Finance, Vol. 24(4), 651-673.
  • NILI, M. & RASTAD, M.(2007). Addressing the growth failure of the oil economies: The role of financial development. The Quarterly Journal of Economics and Finance, Vol.46, 726–740.
  • OBSTFELD, M. (1994). Risk-taking, global diversification, and growth. American Economic Review, Vol.84 (5), 1310–1329.
  • PRASAD, E.S., ROGOFF, K., WEI, S.J. & KOSE, M.A. (2003). Effects of financial globalization on developing countries: some empirical evidence. IMF Occasional Papers, No:220.
  • RAJAN R.G. & ZINGALES L. (1998). Financial dependence and growth. The American Economic Review, Vol.88(3), 559-586.
  • RIOJA, F. & VALEV, N. (2004). Finance and the sources of growth at various stages of economic development. Economic Inquiry, Vol.42, 127–140.
  • ROBINSON, J. (1952). The generalization of the general theory. In the rate of interest, and other essays. London: McMillan, 67–146.
  • SCHUMPETER, J. A. (1959). The Theory of Economic Development, An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle.( Translated by Redvers Opie,), Harvard University Press, (1934)
  • SHAN, J. & MORRIS, A. (2002). Does financial development ‘lead’ economic growth? International Review of Applied Economics, Vol. 16 (2), 153–168.
  • SHAN, J. & JIANHONG Q,. (2006). Does financial development 'lead' economic growth? The case of China. Annals of Economics and Finance, Vol.7(1), 197-216.
  • SHAW, E. S. (1973). Financial deepening in economic development. New York, Oxford University Press.
  • SOYTAŞ, U. & KÜÇÜKKAYA E. (2011). Econonic growth and financial development in Turkey: new evidence. Applied Economics Letter, Vol.18(6), 595-600.
  • ÜNALMIŞ, D. (2002). The causality between financial development and economic growth: The case of Turkey. The Central Bank of the Turkish Republic, Research Department Working Paper, No:3.
  • YÜCEL, F. (2009). Causal relationships between financial development, trade openness and economic growth: The case of Turkey. Journal of Social Sciences 5(1): 33-42.

BRICS Ülkeleri ve Türkiye’de Finansal Gelişme ve İktisadi Büyüme: Bir Panel Veri Analizi

Year 2018, Volume: 5 Issue: 2, 1 - 17, 31.10.2018
https://doi.org/10.17336/igusbd.454878

Abstract

Son birkaç on yılda, finansal gelişme ile ekonomik büyüme arasındaki ilişkiyi inceleyen çok sayıda çalışma olmasına rağmen, kullanılan değişkenler ve yöntemlerdeki çeşitlilik nedeniyle tam bir fikir birliğine ulaşılamamıştır. Bu çalışmada, BRICS Ülkeleri ve Türkiye için finansal gelişme ve ekonomik büyüme (GDP) arasındaki ilişki incelenmiştir. Analiz, 1996-2016 yılları arasındaki 21 yıllık dönemi kapsamaktadır. Finansal gelişme için kullanılan değişkenler, Morgan Stanley Capital International Index (MSCI), krediler (CREDIT), para arzı (BMONEY), dış ticaret (TRADE)’tir.

Analiz sonucuna göre; MSCI istatistiksel olarak anlamalı olup hem uzun hem de kısa dönemde GDP’yi olumlu yönde etkileyen tek değişkendir. BMONEY ve TRADE değişkenleri uzun vadede istatistiksel olarak anlamlı değil iken, kısa dönemde anlamlı olduğu görülmüştür. TRADE, kısa dönemde GDP’ yi pozitif yönde etkilerken, BMONEY negatif yönde etkilemektedir. CREDIT hem kısa vadede ve uzun vadede istatistiksel olarak anlamlı değildir. Nedenselliğin yönüne bakıldığında; MSCI'den GDP'ye, GDP’'den MBROAD'a, MSCI'dan TRADE'e ve MBROAD'dan TRADE'e doğru tek yönlü ilişki bulgulanmıştır. MBROAD ve MSCI arasında herhangi bir nedensellik yokken, TRADE ve GDP arasında iki yönlü bir nedensellik olduğu bulgulanmıştır. Buna göre seçilmiş değişkenler ve ülkeler için 1996-2016 periyodunda; finansal gelişmenin, iktisadi büyümenin belirleyicisi olduğunu kesin olarak söyleyemeyiz. 

References

  • ABU-BADER, S. & ABU-QARN, A.S. (2008). Financial development and economic growth: the Egyptian experience. Journal of Policy Modeling, 30 (5), 887–898.
  • AKKAY, C. (2010). Finansal entegrasyon sürecinde dinansal gelişme ve ekonomik büyüme arasındaki nedenselliğin Türkiye açısından dönemsel olarak araştırılması. İstanbul Üniversitesi Sosyal Bilimler Dergisi, 2, 55–70.
  • AL-YOUSIF, Y.K. (2002). Financial development and economic growth: another look at the evidence from developing countries, Review of Financial Economics, vol. 11(2), 131-150
  • ARCAND, J., BERKES, E. & PANIZZA, U. (2012). Too much finance? IMF Working Paper: 12/161
  • ARTAN, S. (2007). The effects of financial development on growth: Literature and empirical evidence, İktisat İşletme ve Finans, Vol: 22(252), 70-89.
  • BECK, T. & LEVINE, R. (2004). Stock markets, banks and growth: panel evidence. Journal of Banking and Finance, Vol.28, 423-442.
  • BENCIVENGA, V. R., SMITH, B. D. & STARR, R. M. (1995). Transactions costs, technological choice, and endogenous growth, Journal of Economic Theory, 67(1), 53–177.
  • BENCIVENGA, V.R. & SMITH, B.D., (1991). Financial intermediation and endogenous growth. The Review of Economic Studies, Vol.58(2), 195-209.
  • CARLIN, W. & MAYER, C. (2003). Finance, investment, and growth. Journal of Financial Economics, Vol. 69, 191–226.
  • DEIDDA, L. & FATTOUH, B. (2002). Non-linearity between finance and growth. Economics Letters, Vol.74(3), 339-345.
  • GOLDSMITH, R.W.(1969). Financial structure and development. Yale University Press, New Haven, CT.
  • GREENWOOD, J. & SMITH, B.D. (1997). Financial markets in development, and the development of financial markets. Journal of Economic Dynamics and Control, Vol.21, 145-181.
  • GURLEY, J. G. & SHAW E.S. (1955). Financial aspects of economic development. The American Economic Review, Vol. 45(4), 515-538.
  • HASSAN M. K., SANCHEZ, B. & SUKYU, J. (2011). Financial development and economic growth: New evidence from panel data. The Quarterly Review of Economics and Finance, Vol.51(1), 88-104.
  • JAYARATNE, J. & STRAHAN P. E. (1996). The finance-growth nexus: Evidence from bank branch deregulation. The Quartely Journal of Economics, Vol.111(3), 639–670.
  • JUNG, W.S. (1986). Financial development and economic growth: International evidence. Economic Development and Cultural Change, Vol.34, 336-346.
  • KANDIR, S.Y., İSKENDEROĞLU, Ö. & ÖNAL, Y.B. (2007). Finansal gelişme ve ekonomik büyüme arasındaki ilişkinin araştırılması. Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, Vol:16/2, 311-326.
  • KANG, S.J. & Y. SAWADA (2000). Financial repression and external openness in an endogoneous growth model. Journal of International Trade and Economic Development, Vol.9(4), 427-443.
  • KAR, M. & PENTECOST E. J. (2000). Financial development and economic growth in Turkey: Further evidence on the causality Issue. Economic Research Department of Economics, Loughborough University. Paper No. 00/27.
  • KAR, M., NAZLIOGLU, S. & AGIR, H. (2011). Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis. Economic Modelling, Vol.28(1), 685-693.
  • KARAMELIKLI, H., & KESINGÖZ, H. (2017). Finansal gelişme bileşenlerinin ekonomik büyüme üzerindeki etkisi: Türkiye örneği, İnsan ve Toplum Bilimleri Araştırmaları Dergisi, Vol.6(1), 683-701.
  • KHAN, M. S. & SENHADJI, A. (2000). Financial development and economic growth: An overview. IMF Working Paper: 00/209.
  • KING, R.G. & LEVINE, R. (1993). Finance and growth: Schumpeter might be right. The Quarterly Journal of Economics, Vol.108(3), 717-737.
  • KOSE, M. A. & PRASAD, E. S. and TERRONES, M. E. (2006). How do trade and financial integration affect the relationship between growth and volatility? Journal of international Economics, 69(1), 176-202.
  • LEVINE R. & ZERVOS S. (1998). Stock market, banks and economic growth. American Economic Review, Vol.88, 537–558.
  • LEVINE R., LOAYZA N. and BECK T. (2000). Financial intermediation and growth: Causality and causes. Journal of Monetary Economics, Vol.46, 31-77.
  • LEVINE, R. (1997). Financial development and economic growth: views and agenda. Journal of Economic Literature, Vol.35(2), 688–726.
  • LOAYZA, N.V. & RANCIERE, R., (2006). Financial development, financial fragility, and growth. Journal of Money, Credit and Banking, Vol. 38(4), 1051-1076.
  • LUCAS, R. (1988). On the mechanics of economic development. Journal of Monetary Economics, Vol.22, 2-42.
  • MCKINNON, R. I. (1973). Money and capital in economic development. Oxford Press.
  • MENYAH, K., NAZLIOĞLU, Ş. & WOLDE-RUFAEL, Y. (2014). Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling, Vol.37, 386-394.
  • MISHKIN, F. S. (2007). Is financial globalization beneficial? Journal of Money, Credit and Banking, Vol.39(2-3), 259-294.
  • MOYO, C., KHOBAI, H., KOLISI, N., & MBEKI, Z.(2018). Financial development and economic growth in Brazil: a non-linear ARDL Aproach. MPRA Paper No.85252.
  • MUSLUMOV, A. & ARAS, G. (2002). Sermaye piyasası gelişmesi ve ekonomik büyüme arasında nedensellik ilişkileri: OECD ülkeleri örneği. İktisat İşletme ve Finans. Vol.17 (198), 90-100.
  • NDIKUMANA, L. ( 2005). Financial development, financial structure, and domestic investment: International evidence. Journal of International Money and Finance, Vol. 24(4), 651-673.
  • NILI, M. & RASTAD, M.(2007). Addressing the growth failure of the oil economies: The role of financial development. The Quarterly Journal of Economics and Finance, Vol.46, 726–740.
  • OBSTFELD, M. (1994). Risk-taking, global diversification, and growth. American Economic Review, Vol.84 (5), 1310–1329.
  • PRASAD, E.S., ROGOFF, K., WEI, S.J. & KOSE, M.A. (2003). Effects of financial globalization on developing countries: some empirical evidence. IMF Occasional Papers, No:220.
  • RAJAN R.G. & ZINGALES L. (1998). Financial dependence and growth. The American Economic Review, Vol.88(3), 559-586.
  • RIOJA, F. & VALEV, N. (2004). Finance and the sources of growth at various stages of economic development. Economic Inquiry, Vol.42, 127–140.
  • ROBINSON, J. (1952). The generalization of the general theory. In the rate of interest, and other essays. London: McMillan, 67–146.
  • SCHUMPETER, J. A. (1959). The Theory of Economic Development, An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle.( Translated by Redvers Opie,), Harvard University Press, (1934)
  • SHAN, J. & MORRIS, A. (2002). Does financial development ‘lead’ economic growth? International Review of Applied Economics, Vol. 16 (2), 153–168.
  • SHAN, J. & JIANHONG Q,. (2006). Does financial development 'lead' economic growth? The case of China. Annals of Economics and Finance, Vol.7(1), 197-216.
  • SHAW, E. S. (1973). Financial deepening in economic development. New York, Oxford University Press.
  • SOYTAŞ, U. & KÜÇÜKKAYA E. (2011). Econonic growth and financial development in Turkey: new evidence. Applied Economics Letter, Vol.18(6), 595-600.
  • ÜNALMIŞ, D. (2002). The causality between financial development and economic growth: The case of Turkey. The Central Bank of the Turkish Republic, Research Department Working Paper, No:3.
  • YÜCEL, F. (2009). Causal relationships between financial development, trade openness and economic growth: The case of Turkey. Journal of Social Sciences 5(1): 33-42.
There are 48 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

Kemal Erkişi 0000-0001-7197-8768

Publication Date October 31, 2018
Acceptance Date September 25, 2018
Published in Issue Year 2018 Volume: 5 Issue: 2

Cite

APA Erkişi, K. (2018). Financial Development and Economic Growth in BRICS Countries and Turkey: A Panel Data Analysis. İstanbul Gelişim Üniversitesi Sosyal Bilimler Dergisi, 5(2), 1-17. https://doi.org/10.17336/igusbd.454878

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