Financial Development and Economic Growth in BRICS-T Countries: An Econometric Application

Abstract

In this study, the cointegration and causality relationships between economic growth and financial development were empirically analyzed using the annual data of BRICS-T countries for the period from 1991 to 2017. Access, depth, and effectiveness data, as well as the variables of Gross Fixed Capital Formation, labor force, and economic growth, representing the capital, are among the indicators representing IMF's financial development. In this empirical study, where three different models were used, the longterm relationship of capital, labor force, and one of the three indicators with economic growth was examined. In the results obtained, all of the three models were found to have cointegration relationships, and it was concluded that the variables would act together in the long term. In addition, causality relationships between access, depth and efficiency, and economic growth, which represent financial development, were also investigated in this empirical study. In the findings, it was found that economic growth was the causative of access; and that there was a two-way causality relationship between depth and economic growth, as well as between efficiency and economic growth. In light of these results, it was concluded that there was a two-way causality between financial development and economic growth.

Re-Examination of the Supply Leading Hypothesis for Turkey: A Disaggregated Analysis

“…In the global setting, to our best knowledge, only Ferreira (2021) and Gövdeli et al (2021) used disaggregated levels of IMF's FDi data. On the one hand, Ferreira (2021) utilized FDi and its eight subindices to reveal the causal nexus between financial development and economic growth for 46 countries.…”

“…The author found that economic growth Granger causes the Financial Institutions Efficiency Index for Turkey that supported our findings partly. On the other hand, Gövdeli et al (2021) tested the causal nexus between financial development and economic growth for BRICS-T (Brazil, Russia, India, China, South Africa, and Turkey) countries from 1991 to 2017. They found that economic growth Granger causes financial access, financial depth, and financial efficiency, while the last two financial indicators cause economic growth for the countries examined.…”