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We study the interactions between institutional quality, government expenditure, tax revenue, and economic growth in low-income countries (LICs) and lower middle-income countries (LMICs) over 2005–2019. The primary distinguishing factor of the paper is the simultaneous inclusion of all these four variables in a single temporal causal model. A second distinguishing feature of the paper is its focus on LICs and LMICs and a clear distinction between short-run and long-run results. Tax revenue is considered as general revenue as well as revenue from taxes on international trade, and customs and other import duties. Our results show that institutional quality, government expenditure, tax revenue, and economic growth often have endogenous links among each other in the short run. These results are not always uniform across our samples. On the other hand, a robust and uniform result across all samples is that the three covariates are important drivers of long-term economic growth. Thus, the co-development of stronger institutions and more effective fiscal policies (relating to taxes and government expenditure) appear to be key in procuring sustained long-term economic growth of countries.

There have been major reforms of the financial system within Europe over the past two decades. These reforms were initiated to enhance the competitiveness and sustainable economic growth of economies in this region. This paper investigates the inter-relationships between the reforms undertaken in the financial sector (banking sector, stock market, and insurance industries) and economic growth in Europe. More specifically, this study examines whether there are Granger causal relationships between banking competition, stock-market development, insurance market development, and economic growth, using a panel dataset covering European countries over the period from 1996 to 2016. Utilizing a multivariate framework, the study's results show that all the variables are cointegrated. The findings reveal a network of Granger causal associates between the variables, including short-run bidirectional causality between stock market development and insurance market development. In the long run, there is compelling evidence of Granger causality from banking competition, insurance market development, and stock market development to economic growth. The results provide valuable insights into the types of financial sector reforms that will enhance sustainable economic growth in Europe.

Economic growth in the Eurozone has been lacklustre over the last two decades due to increased global competition from economic players in other regions, economic and financial crisis, and political uncertainties within the zone. To increase the global competitiveness of the region, the European Union launched the Europe 2020 Strategy to raise the level of entrepreneurship and innovation, which are purported to be key drivers of economic growth. The main purpose of this paper is to investigate whether this assertion is true. Thus, the paper investigates the Granger causal relationships among entrepreneurship development, innovation, and economic growth for a sample of the Eurozone countries for the period 2001–2016. Using a vector error-correction model, the study finds that in the long run, both entrepreneurship and innovation stimulate economic growth. In the short run, strong causal links exist but are not always uniform. The results reveal that Eurozone countries should indeed base their growth strategies on policies that promote innovation and policies that create incentives for entrepreneurship.

PurposeThe purpose of this paper is to consider the heterogeneous relationship among financial development, foreign direct investment (FDI) and economic growth, examining the possible directions of causality among them in both the short and long runs.Design/methodology/approachA sample of the G-20 countries over the period 1970–2016 is utilized. A vector error-correction model is used to consider the possible directions of causality among financial development, FDI and economic growth.FindingsResults suggest a cointegrating relationship among the three series. Although short-run links among the variables are mostly non-uniform, both financial development and FDI matter in the determination of long-run economic growth.Practical implicationsAttention must be paid to policies that promote financial development. This, in turn, calls for fostering incentives to guarantee continued support to liberalize the economy and promoting capital openness. Additionally, financial infrastructure should be improved to improve financial innovation. The establishment of a well-developed financial market, including well-functioning banks and other financial institutions, can facilitate further investment and an easier means of raising capital to support the activities of FDI. Economic growth can ultimately be elevated through both financial development and FDI.Originality/valueThe study considers a sample of the G-20 countries, which have received relatively little attention in the existing literature. In addition, the study concurrently analyses the trivariate causal relationship among financial development, FDI and economic growth, a topic on which there has been a dearth of research.

Many studies have investigated the causal relationship between economic growth and the depth in the stock market, between economic growth and trade openness, or between economic growth and foreign direct investment. Advancing on earlier work, this paper uses vector error-correction and cointegration techniques in order to establish whether there is a long-run equilibrium relationship between all four variables. We consider a sample of 25 ASEAN Regional Forum (ARF) countries which are studied over the period 1961–2012. Our analysis, which combines various strands of the literature, establishes the direction of causality between the variables. Policy recommendations include the encouragement of mutual fund investment by smaller investors to increase stock market depth as well as methods to increase foreign direct investment, such as tax holidays.

The banking sector and the stock market in Europe have been adversely impacted by a series of global financial crises over the last two decades. Major financial reforms were implemented to enhance ...

The energy and financial sectors have undergone rapid transformations over the last five decades and these changes have had a major impact on economic growth rates across the globe. In this paper, using a panel vector error-correction model, we study the interactions between energy consumption patterns, financial sector development, and economic growth in 35 Financial Action Task Force (FATF) countries over 1961–2015. We focus on the direction of Granger causality between the variables. Our empirical results show that both energy consumption patterns and financial sector development are significant long-term drivers of economic growth in the FATF countries. Thus, the sophistication of the financial sector and resources to develop the energy sector will contribute to enhancing the economic prosperity of the FATF countries in the long run.

This article employs panel unit root and panel cointegration tests to determine the interactions between innovation, financial development, and economic growth in 49 European countries between 1961 and 2014. The results suggest a cointegrating relationship between the three series. A vector error-correction model is estimated, showing that financial development and innovation are both causative factors of economic growth in the long run. Thus, a policy focus on financial development and innovation is appropriate as an approach to boost the economic performance of these countries.

Much of the literature on venture capital (VC) investment focuses on the impact of such investment on firm performance. Although some studies consider the link between VC investment, innovation, and economic growth (usually in a pair), the role of financial development in these relationships is often considered only in the periphery, if it is considered at all. The present study uses a panel vector error-correction model to study the Granger causality among VC investment, innovation, per capita economic growth, and financial development. We study 23 European countries over the period of 1989–2015 and consider several different measures of innovation based on indicators such as patenting, trademarks, research and development, and researcher activities. The empirical results indicate that all three variables (VC investment, financial development, and innovation) contribute to long-term economic growth. The results also show strong endogenous relationships among the four variables in the short run based on the types of innovation indicators and venture capital measures used in the empirical model. The short-run and long-run analysis between the variables provides important policy implications for securing sustained economic growth in Europe.

This paper examines the cointegrating and causal relationships between insurance market development (IMD) and economic growth based on panel-data estimation techniques. It also investigates the dynamic interrelationships amongst a number of important macroeconomic variables on IMD-growth nexus. The sample consists of 26 countries observed over the period 1980-2013. We use six different indicators of IMD, covered under both insurance density and insurance penetration, to validate the robustness of our results. Our findings affirm a long-run equilibrium relationship between insurance market development, economic growth, and six other macroeconomic variables selected, namely broad money supply (relative to national income), real interest rates, inflation rates, urban population growth, youth dependency ratios, and government consumption expenditure (relative to national income). We use a panel vector auto-regression model to examine the nature of Granger causality among the variables. Most significantly, we find that IMD and some macroeconomic variables Granger-cause economic growth in the long run, irrespective of which measure of IMD we use.

We study the interactions between the diffusion of mobile phones, foreign direct investment, financial development, ICT goods imports, and economic growth using a panel dataset covering the G-20 countries for the period 1990–2014. Using our multivariate framework, we find that all of the variables are cointegrated. Our findings also reveal a network of short-run and long-run causal relationships between the variables, including long-run unidirectional causality from foreign direct investment and financial development to the diffusion of mobile phones and economic growth.

This study investigates the Granger causal relationships between innovation, economic growth, information and communication technology (ICT) infrastructure, government consumption expenditure, gross capital formation, foreign direct investment, and trade openness. Using panel data from 32 high-income OECD countries from 1970 to 2016 and panel cointegration techniques, results show that these variables are cointegrated. The Granger causality tests further confirm that, taking other variables into account, there is bi-directional causality between innovation and economic growth in the long run. Moreover, both economic growth and innovation are generally impacted in the long run by the other variables that we consider. The short-run causality results reveal a diverse pattern of short-run adjustment dynamics among the variables including the possibility of feedback among some of them. Important policy implications for sustainable economic growth and higher innovation suggest elevating government consumption expenditure, increasing capital formation, further opening of countries' economies to trade, as well as improving ICT infrastructure.

This paper examines the relationships between economic growth and four different types of financial development in ASEAN Regional Forum (ARF) countries over the period 1991–2011. Using principal component analysis (PCA) to construct development indices, and a panel vector auto-regressive model to test for Granger causalities, the study demonstrates unidirectional and bidirectional causality between the variables. The study enhances understanding of the interrelationship between the variables, combining different strands of the literature, and investigating countries previously neglected in this context. The paper recommends making banking more accessible to residents without bank accounts in ARF countries and promoting stock market development to facilitate access to investment capital in order to enhance economic growth.

This paper investigated the linkages between banking sector depth, trade openness, and economic growth using a panel data set covering the ASEAN regional forum countries for the period 1961â2012. Using our multivariate framework, we first found that all the variables were integrated of order one and were cointegrated. Our panel-data estimation procedures offered more robust estimates than previous studies by utilizing variations between countries as well as variations over time. The results of this study indicated a general long-run equilibrium relationship among trade openness, banking sector depth and economic growth as well as a short-run relationship between these variables. Policy recommendations include those that will promote greater banking sector development as well as increased trade openness. JEL classification: O16, O43, E44, E31, Keywords: Trade openness, Banking sector depth, Economic growth, Granger causality, ASEAN regional forum countries

Venture capital (VC) is a key catalyst for nurturing start-up firms with high-growth potential to undertake innovative endeavors that contribute to national wealth. Existing literature concentrates on the impact of venture capital on firm-level performance. Unlike much of the earlier work, we conduct a macro study examining short-term and long-term relationships between VC investment, the state of the financial sector, and economic growth in 20 European single market countries between 1989 and 2015. We show that major transformations (political, economic, financial and institutional) over the sample period in the Eurozone region have resulted in the data series used in the study (economic growth, financial sector development, and VC investment) to be non-stationary. As such, the vector error-correction model (VECM) and Granger-Causality test are used to examine short-term and long-term relationships between VC investment, financial development, and economic growth for the sample countries. The fin...

Purpose The purpose of this paper is to shed light on the age-old trade-and-economic-growth controversy. The authors do so by utilizing the data relating to the G-20 countries between 1988 and 2013. Design/methodology/approach The authors seek to establish the formal statistical links between openness to trade and economic growth in the context of interactions with financial depth, gross capital formation, and foreign direct investment. The authors use a panel vector autoregressive model to obtain the estimates. The authors check for the robustness of the results. Findings The authors find that all the variables are cointegrated. That is, there is a long-run equilibrium relationship between the variables. Moreover, trade openness, financial depth, gross capital formation, and foreign direct investment are all causative factors for the economic growth of the G-20 countries in the long run. At the same time, the short-run results demonstrate that there is a myriad of causal links between these variables. Practical implications The decision makers in the G-20 countries wishing to encourage economic growth in the long run should pay close attention to trade openness, financial depth, gross capital formation, and foreign direct investment inflows to their countries. Originality/value The authors study an important group of countries over a long span of time, using advanced panel data techniques. The results demonstrate that future studies on economic growth that do not simultaneously consider trade openness, financial depth, foreign direct investment, and gross capital formation will offer biased or misguided results.

Rapid technological development over the last three decades has enabled different sectors of the economy to be seamlessly integrated. This has had an important spill-over impact on the wealth of countries across the globe. In this paper we examine the inter-linkages between the banking sector and the insurance industry on the economic growth of the G-20 countries between 1980 and 2014. Using the vector auto-regression model and the Granger causality test, the study shows that in the long run, developments in the banking sector and insurance industry have had a significant impact on the economic growth of the G-20 countries. In the short term, the inter-relationships between the three factors prove to be more complex in that they differ by countries in different stages of development. Based on the empirical findings, this paper discusses the policies and strategies policy makers and banks and insurance companies should have in place in order to create sustained economic growth in an increasingly inter-connected world.

This paper examines causal relationships between telecommunications infrastructure and usage (TEL), foreign direct investment (FDI), and economic growth in the Asian-21 countries for the period 1965–2012. TEL is defined in terms of the prevalence of telephone main lines, mobile phones, internet servers and users, as well as the extent of fixed broadband. These measures are considered both individually and collectively in the form of a composite index of TEL. We report results on long-run relationships between TEL, FDI, and economic growth. We also use a panel vector auto-regression model to reveal the nature of Granger causality among the three variables. Results from these causal relationships provide important policy implications to the Asian-21 countries.

The paper investigates causal relationships between trade openness, foreign direct investment, financial development, and economic growth in 19 Eurozone countries over the period 1988–2013. Using a panel vector error-correction model (VECM), the empirical results show that these variables are cointegrated. The study shows that a combination of opening the Eurozone countries for trade and fostering their financial and economic development have elevated inflows of foreign direct investment into the region in the long run. At the same time, increasing inflows of foreign direct investment in the short run have propelled economic growth, which in return has strengthened the role of financial development and international trade to sustain economic growth in the region through feedback effects. The empirical results have important policy implications for countries in the Eurozone, especially those who face challenges as a result of lack of confidence in their financial system and those who face a soverei...

This paper examines the mutual relationship between broadband penetration, financial development, and economic growth in the 22 Arab League countries for the period between 2001 and 2013. Financial development (represented by broad money supply, claims on the private sector, domestic credit to the private sector, domestic credit provided by the banking sector, market capitalization, turnover ratio, and traded stocks) is assessed both individually, and by a composite index. Our results reveal that there is a long-run equilibrium relationship between broadband penetration, financial development, and economic growth. Additionally, we use a panel vector autoregression model to reveal the nature of Granger causality between the covariates. The most important insight of this study is the presence of bidirectional causality from economic growth to broadband penetration in the long run. In addition, we find that financial development together with broadband penetration Granger-cause economic growth in the...

This paper examines the causal relationships between insurance market activities, economic growth, financial depth, and government consumption expenditure. We utilize a panel vector autoregressive model to test Granger causality for 18 middle-income countries over 1980–2012—a group that has not been previously studied in this literature. The results show a robust long-run economic relationship between insurance market activities, economic growth, financial depth, and government consumption expenditure. Moreover, in the short run, we find bidirectional causality between financial depth and economic growth, between financial depth and government consumption expenditure, and between insurance market activities and government consumption expenditure. Unidirectional causality exists from insurance market activities to economic growth, from financial depth to insurance market activities, and from government consumption expenditure to economic growth.

Using a panel vector auto-regressive model, we study interactions between innovation, financial development and economic growth in 18 Eurozone countries between 1961 and 2013. We focus on whether causality runs between these variables both ways, one way, the other way or not at all. Our empirical results show that development of the financial sector and enhanced innovative capacity in the Eurozone contributes to long-term economic growth in the countries in the region.

We use principal component analysis (PCA) to construct an index for the development of telecommunications infrastructure (DTI), and an index for financial development. We then assess the causal relationship among DTI, financial development, and economic growth in 21 Asian countries between 1991 and 2012. We study the Asian countries in four regional groups, and use a panel vector auto-regressive (VAR) model to detect the direction of causality among the three variables. Our results reveal that there is Granger-causality among the variables, both in the short run and in the long run, although the exact nature of the results varies by region in Asia.

This paper employs Granger causality tests to examine linkages between economic growth, measured by changes in real per capita GDP, financial maturity, measured by an index – calculated by using principal component analysis, and the diffusion of telecommunications technology (DTT) in 21 Asian countries over the period 1961-2012. We advance on previous studies with (a) advanced estimation procedures (panel cointegration techniques and panel Granger causality tests); and (b) the inclusion of all three potentially two-way interacting variables conjointly. Our findings are not uniform: they vary based on the region and country that is studied. We find that in the case of Bangladesh, Philippines, Singapore, Saudi Arabia, and United Arab Emirates and for Total Asia, financial maturity leads to economic growth, lending support to the supply-leading hypothesis. This implies that economic growth depends upon the level of financial maturity of the countries. In the case of Hong Kong, South Korea, Pakistan, Sri Lanka, Indonesia, and Vietnam, economic growth leads to financial maturity, lending support to the demand-following hypothesis. This implies that economic growth determines the level of financial maturity. For Bangladesh, Philippines, Singapore, Saudi Arabia, United Arab Emirates, and Total Asia, financial maturity leads to economic growth, in line with the supply-leading hypothesis. In case of China, Hong Kong, Japan, India, Iran, Thailand, Kuwait, East Asia, South Asia, and West Asia, economic growth and financial maturity cause each other, lending support to both the demand-following and supply-leading hypotheses. Furthermore, in the case of India, Malaysia, and Philippines, economic growth leads to DTT, congruent with the demand-following hypothesis. On the other hand, in the case of Bangladesh, Sri Lanka, Singapore, Thailand, Saudi Arabia, United Arab Emirates, South Asia, South East Asia, and Total Asia, DTT leads to economic growth, lending support to the supply-leading hypothesis. By contrast, for China, Hong Kong, Japan, South Korea, Qatar, and East Asia, economic growth and DTT are self-reinforcing and subject to feedback consistent with both the demand-following and supply-leading hypotheses. Finally, in the case of Hong Kong, Pakistan, Indonesia, Philippines, Thailand, Vietnam, United Arab Emirates, South East Asia, and Total Asia, DTT leads to financial maturity, lending support to the supply-leading hypothesis, while for China, India, Kuwait, Qatar, and West Asia, financial maturity leads to DTT, lending support to the demand-following hypothesis. In case of Malaysia, financial maturity and DTT cause each other thus supporting both the demand-following and supply-leading hypotheses.

The article investigates causal relationships between internet penetration rates, financial depth and per capita economic growth in the Next-11 countries. Using panel vector autoregressive (VAR) approaches, our empirical results show that these variables are cointegrated. Moreover, we find bidirectional causality between internet penetration rates and economic growth, and between financial depth and economic growth in the short run.

This study assesses the causal relationship between information and communication technology (ICT) penetration, financial development, and economic growth in Next-11 countries between 1961 and 2012. A panel vector auto-regressive (VAR) model is used to detect the direction of causality between ICT, financial sector development and economic growth for these countries. The results reveal that there is Granger-causality among the variables both in the short run and in the long run, although the exact nature of the results varies by the ICT penetration indicators for the sample countries. Empirical results from this study provide valuable insights on policies pertaining to ICT penetration, financial sector development and economic growth, El presente estudio evalúa la relación causal entre la penetración de las tecnologías de la información y comunicación (TIC), el desarrollo financiero y el crecimiento económico en los Próximos 11 entre 1961 y 2012. Se utilizó un modelo de panel de vectores autorregresivos países para detectar la dirección de causalidad entre las TIC, el desarrollo del sector financiero y el crecimiento económico para estos países. Los resultados revelan que existe una causalidad de Granger entre las variables tanto a corto como a medio plazo, si bien la naturaleza exacta de los hallazgos varía conforme a los indicadores de penetración de las TIC para los países dela muestra. Los resultados empíricos de este estudio suponen una valiosa perspectiva a cerca de las políticas de penetración de las TIC, el desarrollo del sector financiero y el crecimiento económico

This paper examines mutual relationships between telecommunications infrastructure, gross capital formation, and economic growth in the G-20 countries between 1961 and 2012. The countries are assessed individually, as a group of developing and developed countries within two sub-groups, and as a whole. Our results demonstrate that there is a long-run equilibrium relationship between these three variables. We arrive at this conclusion for the two sub-groups, for the G-20 as a whole, as well as for all individual countries. We then use a panel vector auto-regression model to reveal the nature of Granger causality among the three variables. As expected, the results are not uniform and are country and sample dependent.