Relationship between Financial Development and Economic Growth: Empirical Evidence in Indonesia

Hasan, Hafnida

doi:10.5539/ijef.v10n12p37

Cited by 8 publications

(3 citation statements)

References 19 publications

(25 reference statements)

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“…Ariuna and Gibson (2016), using data for China covering the period 1978-2011 and applying the VAR model, concluded that there is a long term relationship between economic growth and financial development. These results are also supported by Akinboade and Kinfack (2015) who used the ARDL for South Africa and also the studies by Magaji, Darma and Igwe (2021) and Hasan (2018), using the Toda-Yamamoto approach to Granger causality.…”

Section: Stock Marketsupporting

confidence: 73%

Examining the co-integrating relationship between financial development and economic growth

Chiwira

2023

IJRBS

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This study investigated the nexus between financial development and economic growth, exploring the short-run and long-run impact of financial development on economic growth in the Sothern African Development Community (SADC). The SADC was fragmented into middle-income countries and low-income countries so as to ascertain the income effect on the nature of the relationship, an exploration not considered by previous studies. The study used panel data covering the period 1980 to 2020. It employed the Autoregressive Distributed Lag (ARDL) Bounds and the Toda and Yamamoto and Dolado and Lütkepohl (TYDL) models to examine the relationship and the direction of causality respectively. In the short run, financial development, through domestic credit to the private sector, spurs economic growth and in the long run financial development focus should be on promoting bank deposits. Causality tests between economic growth and financial development tests showed mixed results depending on the variable used for measuring financial development. In addition, the SADC countries are encouraged to strengthen their financial sector legislation, strategies, and banking system supervision so as to enhance the financial sector efficiency as well as to realise the benefits of financial innovation.

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Section: Stock Marketsupporting

confidence: 73%

Examining the co-integrating relationship between financial development and economic growth

Chiwira

2023

IJRBS

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“…By employing data from Malaysia, Ismail et al (2019) concluded that economic growth precedes the advancement of the financial system. Additionally, Hasan (2018) and Pinshi (2020) reached a similar conclusion for the Indonesian and Congolese economies, and the demand-following hypothesis was generally dominant.…”

Section: Literature Reviewmentioning

confidence: 76%

Revisiting the finance-growth nexus in Hong Kong: fresh insights from nonparametric analysis

Almassri

Özdeşer

Saliminezhad

2023

JES

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PurposeSince financial sector plays a critical economic role in Hong Kong, the current research aims to comprehensively analyze the association between financial development and economic growth in the country to draw correct conclusions about the impact that financial sector's development has on the growth of the economy. This requires both using of more comprehensive data that includes all or nearly all elements of the country's financial sector and utilizing advanced econometrics techniques to provide more reliable evidence based on the findings. In the study, both issues have been addressed more academically to aid the relevant authorities better.Design/methodology/approachThis study empirically examines the financial development-economic growth nexus in Hong Kong employing data covering 1980–2019. The quantile-on-quantile (QQ) approach of Sim and Zhou (2015) is utilized to investigate certain subtle aspects of the association linking financial development and economic growth. In addition, the authors benefit from applying the nonlinear Granger causality test of Diks and Panchenko (2006) to assess the variables' nexus in a nonlinear manner.FindingsIn contrast to the evidence of a unidirectional linkage documented in many related studies, the empirical findings suggest that a bi-directional relationship exists between financial development and economic growth for Hong Kong. This is a helpful input for the relevant policymakers and implies that they can set appropriate policies and regulations to balance financial development and economic growth in this country.Originality/valueThe originality of this study can be divided into two parts. Methodologically, unlike past studies that utilized mostly linear and parametric methods, the paper contributes to the literature by applying the more robust nonparametric and nonlinear methodologies. Theoretically, most researchers have used various financial development indicators, which led to very different conclusions. Therefore, this study attempts to resolve this deficiency in the literature by using a more comprehensive index for financial development.

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“…When it comes to the fostering of the financial units, the relationship between prosperity in the financial aspects and fostering of the GDP is also considered to be highly significant that primarily depends on the effectiveness and growth of the financial sectors operating in the country. According to the study conducted by Hasan (2018), in Indonesia, financial institutions and the openness of the country towards international trading play a significant role in boosting the economy towards growth. However, there are various studies that argue on the higher effect of fostering of financial strength on the GDP increase of Indonesia as some studies consider it to be the primary factor and some studies consider it to be a secondary factor for making an economy grow rapidly.…”

Section: Introductionmentioning

confidence: 99%

Utilization of Energy Sources, Financial Stability and Prosperity in the Economy of Indonesia

Hanh¹,

Huy

Dat³

2020

IJEEP

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The aim of this study was to explore the relationship between utilization of energy sources, financial stability and prosperity in the economy of Indonesia. For this purpose this study conducted panel data analysis and gathered data from 1990 to 2018. The study explored the relationship of CO 2 emissions and utilization of energy sources per capita as indicators of utilization of energy sources. The indicators for financial stability were real domestic credit to the private sector where the financial information of different financial institutions operating in Indonesia has been collected. The prosperity in the economy indicator for Indonesia was gross domestic product per capita and also the labour force that works within different sectors operating in the country. Using descriptive statistics, Unit root analysis, and the autoregressive distributed lag techniques, a panel data analysis was conducted. The results of showed that there is long term relationship between utilization of energy sources, financial stability and prosperity in the economy indictors of Indonesia.

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Relationship between Financial Development and Economic Growth: Empirical Evidence in Indonesia

Cited by 8 publications

References 19 publications

Examining the co-integrating relationship between financial development and economic growth

Examining the co-integrating relationship between financial development and economic growth

Revisiting the finance-growth nexus in Hong Kong: fresh insights from nonparametric analysis

Utilization of Energy Sources, Financial Stability and Prosperity in the Economy of Indonesia

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