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This study examined the interactions between financial market development, taxation propensity, and economic growth in OECD and non-OECD countries for the period 1961–2019. The aim was to investigate whether there is temporal causality between these variables. Using dynamic panel data modelling, we found long- and short-run inter-linkages between the variables. The study’s most robust finding is that both financial market development and taxation propensity stimulate economic growth in the long run. In contrast, the short-run results are not uniform and depend on the specific measure of financial market development used. Overall, the empirical results suggest that an integrated policy approach in developing financial markets and elevating countries’ taxation propensity will contribute to the economic growth of both the OECD and non-OECD countries.

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.

Mounting scientific evidence shows that CO2 emissions have been a primary cause of climate change, which has harmed the quality of human life and economic development. To reduce the carbon footprint, many developed economies have undertaken various institutional reforms to transition their economies to clean energy sources that are compatible with sound economic growth. The picture is different for many developing countries whose economic development in the past has been dependent on fossil fuels or hydrocarbon energy sources, which have affected their climate adversely. The impact of the quality of the latter countries’ institutions on both climate change and economic growth simultaneously has been under-studied. To address this literature gap, this paper examines the links between institutional quality, CO2 emission, and economic growth in developing countries. Using the Granger Causality test, the study reveals that there is strong interdependence among the variables. Hence, policymakers in these countries should implement holistic co-development policy frameworks that strengthen the institutions of governance as well as adopting clean-energy industrial strategies that minimize CO2 emissions. Such policies positively impact economic growth in these 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.

This study examines key factors in the economic growth of middle-income countries over the period 1970–2017. The variables considered are ICT infrastructure development, taxation revenue, government expenditure, gross capital formation, foreign direct investment, and inflation. This study considers interlinkages between the macroeconomic variables noted above. The purpose of this study is to determine: (1) if there is causality between the variables and (2) the direction of any causality. Using a panel vector error-correction model, we find both short-run and long-run relationships between the variables. In each specification, we find that ICT infrastructure development, taxation revenue and the four macroeconomic variables all stimulate economic growth in the long run. This suggests that policymakers should curate an integrated and holistic policy framework pertaining to taxation, ICT infrastructure development and other macroeconomic policies to create a vibrant national economic ecosystem that would ensure the sustained economic growth of middle-income countries.

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.

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.

There has been a significant transformation in the diffusion of information and communication technology (ICT), development of the venture capital industry, and economic growth in European countries over the past three decades. Using vector error-correction modelling, we examine the possible interrelations between venture capital investment, ICT infrastructure, and economic growth, based on annual data from 25 European countries between 1989 and 2016. Specifically, we examine the direction of Granger causality between these variables. We find that the variables are cointegrated. Our empirical results also illustrate that both economic growth and the development of ICT infrastructure impact all stages of venture capital investment (early, late, and overall VC investment) in the long run. The study also shows that economic growth and late-stage venture capital investment impact internet usage; and internet usage and late-stage venture capital impact economic growth in the long run. The results also reveal strong inter-linkages between the variables in the short run. Overall, empirical results suggest that policy-makers should give special attention to an integrated policy approach for the co-development of the ICT infrastructure, venture capital, and economic growth in Europe.

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 ...

Purpose: The paper investigates whether Granger causal relationships exist between bond market development, stock market development, economic growth and two other macroeconomic variables, namely, inflation rate and real interest rate. The study aims to expand the domain of economic growth by including a more in-depth analysis of the possible impact that bond market and stock market development has on economic growth than is normally found in the literature. Design/methodology/approach: This paper uses a panel data set of the G-20 countries for the period 1991-2016. It uses a panel vector auto-regression model to reveal the nature of any Granger causality among the five variables. Findings: The paper provides empirical insights that both bond market development and stock market development are cointegrated with economic growth, inflation rate and real interest rate. The most robust result from the panel Granger causality test is that bond market development, stock market development, inflation rate and real interest rate are demonstrable drivers of economic growth in the long run. Research limitations/implications: Because of the chosen research approach, the research results may lack theoretical foundations. Therefore, perhaps the more fully grounded interactive findings of this study can inspire theorists to fill the missing gap. Practical implications – This paper includes lessons for policymakers in the G-20 countries seeking to stimulate economic growth in the long run and how they need to ensure greater stability of the interest rate and inflation rate as well as fully developing their financial markets, as both bond markets and stock markets are obvious drivers of economic growth. Originality/value: This paper fulfills an identified need to study causal relationships between bond market development, stock market development, economic growth and two other macroeconomic variables, i.e. inflation rate and real interest rate. Objetivo: El documento investiga si existen relaciones causales de Granger entre el desarrollo del mercado de bonos, el desarrollo del mercado de valores, el crecimiento económico y otras dos variables macroeconómicas, a saber, la tasa de inflación y la tasa de interés real. El estudio tiene como objetivo expandir el dominio del crecimiento económico al incluir un análisis más profundo del posible impacto que el mercado de bonos y el desarrollo del mercado de valores tiene sobre el crecimiento económico que el que normalmente se encuentra en la literatura. Diseño / metodología / enfoque: este documento utiliza un conjunto de datos de panel de los países del G-20 para el período 1991-2016. Utiliza un modelo de autorregresión de vector de panel para revelar la naturaleza de cualquier causalidad de Granger entre las cinco variables. Hallazgos: El documento proporciona información empírica de que tanto el desarrollo del mercado de bonos como el desarrollo del mercado de valores están cointegrados con el crecimiento económico, la tasa de inflación y la tasa de interés real. El resultado más sólido de la prueba de causalidad del panel de Granger es que el desarrollo del mercado de bonos, el desarrollo del mercado de valores, la tasa de inflación y la tasa de interés real son impulsores demostrables del crecimiento económico a largo plazo. Limitaciones / implicaciones de la investigación : Debido al enfoque de investigación elegido, los resultados de la investigación pueden carecer de fundamentos teóricos. Por lo tanto, quizás los hallazgos interactivos más plenamente fundamentados de este estudio puedan inspirar a los teóricos a llenar el vacío que falta. Implicaciones prácticas: este documento incluye lecciones para los responsables de la formulación de políticas en los países del G-20 que buscan estimular el crecimiento económico a largo plazo y cómo deben garantizar una mayor estabilidad de la tasa de interés y la tasa de inflación, así como el desarrollo completo de sus mercados financieros, como Los mercados de bonos y los mercados de valores son impulsores obvios del crecimiento económico. Originalidad / valor: Este documento satisface una necesidad identificada de estudiar las relaciones causales entre el desarrollo del mercado de bonos, el desarrollo del mercado de valores, el crecimiento económico y otras dos variables macroeconómicas, es decir, la tasa de inflación y la tasa de interés real.

Over the last 5 decades, the economic landscape in Europe has been transformed rapidly due to innovation, digitisation of the economy, and emergence of new sources of growth. However, the complex dynamics among diffusion of innovation, penetration of information and communication technology (ICT), and economic growth have not been adequately studied. This paper investigates the relationships among these three variables for European countries over 1961–2016. The goal is to determine whether the direction of causality among the variables runs both ways, one way, or not at all. Using a vector error-correction model, we find that in the long run, both innovation diffusion and ICT penetration stimulate economic growth. In the short run, however, the causal links are not always uniform and depend on proxies that are used for innovation diffusion and ICT penetration. The results provide valuable insights on the types of policies and strategies that would sustain economic growth in European economies.

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.

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.

Intensification of research and development (R&D) and the information and communication technology (ICT) infrastructure have been regarded as important drivers for sustained economic growth across the globe. In this study, using a panel vector autoregressive model, we examine the endogenous relationships between R&D, ICT infrastructure development and economic growth in the OECD countries between 1961 and 2018. The empirical results show that both R&D and ICT infrastructure development contribute to long-term economic growth in the OECD countries. The short-run dynamics show that complex inter-relationships between these variables exist. The key insight from this study is that to attain sustained economic growth, policymakers in the OECD economies should put in place an integrated framework that takes into consideration co-development policies pertaining to R&D investment, ICT diffusion and economic growth-enhancing initiatives.

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.

Purpose – The purpose of this paper is motivated by research-based assertions that: the causes of economic growth in countries like India are not well understood; they are not elucidated by using simple bivariate relationships between economic growth and other variables, taken one at a time; and dynamic linkages between growth, trade openness and financial sector depth are required for any comprehensive treatment of this inquiry. Design/methodology/approach – This paper investigates the pivotal role of financial depth (defined as the relative importance in the economy of the banking sector or the stock market) and whether it bears any evidential relationship to trade openness and economic growth during the era of Indian post-globalization since 1990. Two key objectives are to uncover whether there is a long-run relationship between the variables and whether they can be said to cause one another. Autoregressive distributive lag (ARDL) bounds testing procedures and vector autoregressive error correction mod...

This paper examines linkages among transportation intensity, the extent of urbanization, CO2 emissions, and economic growth. We use two measures of transportation intensity: (i) per-capita rates of utilization of air-passenger transport facilities and (ii) per-capita rates of utilization of air-freight transport facilities. By studying the G-20 countries over the period 1961–2012 and employing a panel vector auto-regressive model for detecting Granger causality, we find a network of causal connections among these four variables in the short run. We also find that economic growth tends to converge to its long-run equilibrium path in response to changes in the other variables. Our fundamental conclusion is that passenger carriage intensity should be improved in the developing countries within the G-20 for the purpose of propelling economic growth.

This paper investigates causal relationships between information and communications technologies (ICT) infrastructure, financial development, and economic growth in Asian countries over the twelve-year period 2001–2012. Using panel cointegration techniques, our empirical results show these variables are cointegrated, with a myriad of short-run and long-run causal links between ICT infrastructure and economic growth, between financial development and economic growth, and between ICT infrastructure and financial development.

This paper investigates cointegration relationships and Granger causality nexus in a trivariate framework among economic growth, inflation, and stock market development. Utilizing three measures of stock market development and employing a panel vector autoregressive model, we study 34 OECD countries over the time period of 1960–2012. Our novel panel-data estimation method allows us to identify important causal links between the variables both in the short run and in the long run.

This paper examines the linkages between economic growth, oil prices, depth in the stock market, and three other key macroeconomic indicators: real effective exchange rate, inflation rate, and real rate of interest. We employ a panel vector autoregressive model to test Granger causality for the G-20 countries over the period 1961–2012. A novel approach to this study is that we clearly demarcate the long-run and short-run relations between the economic variables. The results show a robust long-run economic relationship between economic growth, oil prices, stock market depth, real effective exchange rate, inflation rate, and real rate of interest. In the long run, real economic growth is found to respond to any deviation in the long-run equilibrium relationship that is found to exist between the different measures of stock market depth, oil prices, and the other macroeconomic variables. In the short run we find a complex network of causal relationships between the variables. While the empirical evidence of short-run causality is mixed, there is clear evidence that real economic growth responds to various measures of stock market depth, allowing for real oil price movements and changes in the real effective exchange rate, inflation rate, and real rate of interest.

This paper examines the relationship between banking sector development, stock market development, economic growth, and four other macroeconomic variables in ASEAN countries for the period 1961–2012. Using principal component analysis for the construction of the development indices and a panel vector auto-regressive model for testing the Granger causalities, this study finds the presence of both unidirectional and bidirectional causality links between these variables. The study contributes to understanding the importance of the interrelationship between the variables and combines the different strands of the literature. It also contributes to the literature by focusing on a group of countries that have not been studied before. One particular policy recommendation is to make the banking sector more accessible for those country's inhabitants that do not have bank accounts. Another policy recommendation is to nurture stock market development, which will facilitate the increased raising of capital for investment purposes to enhance economic growth.

This paper examines the linkages between the development of telecommunications infrastructure (DTI), economic growth, and four key indicators of operation of a modern economy: gross capital formation, foreign direct investment inflows, urbanization rates, and trade openness. By studying the G-20 countries over the period 1991-2012 and employing a panel vector auto-regressive model for detecting Granger causality, we find a network of long-run causal connections between these variables, including bidirectional causality between DTI and economic growth.

Purpose – The purpose of this paper is to examine the nature of causal relations between banking sector maturity, stock market maturity, and four aspects of performance and operation of the economy: economic growth, inflation, openness in trade, and the degree of government involvement in the economy. Design/methodology/approach – The authors look for possible links between the variables by conducting panel cointegration and causality tests, using a large sample of Asian countries over the period 1960-2011. Novel panel data estimation methods allow for robust estimates, using both variation between countries and variation over time. Findings – The study identifies interesting causal links among the variables deriving uniquely from our innovations. In particular, The paper finds that for all regions considered, banking sector maturity and stock market maturity are causally linked, sometimes in both directions. Furthermore, stock market maturity may lead to economic growth, both directly and indirectly through indicators such as inflation and trade openness. The findings also support the notion that economic growth affects the maturity of the stock market in most regions. Practical implications – The results lend support to the notion that a mature financial sector is a key contributor to generating economic growth. Furthermore, economic growth itself has the potential to bring about maturity in the financial sector. Originality/value – The paper uses sophisticated principal-component analysis, panel cointegration, and Granger causality tests, methods not used in this literature before. The method was applied to recent data pertaining to 35 Asian countries – a group of countries that has previously not been adopted in this literature.

Purpose– Empirical evidence on the relation between happiness (life satisfaction) and corruption is barely perceptible in the literature. The purpose of this paper is to contribute to closing this gap by presenting some estimates using a large cross-section of countries over the period 1996-2010.Design/methodology/approach– The empirical model allows both corruption and per capita income to enter as arguments of a happiness “production function”. The correlation between happiness and corruption is presumed to be non-linear.Findings– While the results do not support the existence of a Kuznets-type trajectory, the study finds that the level of per capita income determines whether happiness and corruption are related and in what way. The authors estimate cutoff income levels at which corruption has a discernible effect on happiness. The results show that corruption reduces happiness, but only for high-income countries – roughly the upper half of the income range in the sample.Practical implications– Results nullify the oft-asserted statement that happiness is negatively linked to corruption in all countries. The nature of correlation is more complex.Originality/value– The paper goes beyond simply testing whether happiness is related to corruption. It conjectures that the relationship between the two variables is non-monotonic. Thus, the analysis considers the notion that the association between happiness and probity is income dependent. A novel feature of the empirical model is that the estimated income cutoff levels are endogenously determined. That is, income thresholds are not pre-determined. The authors also test for the robustness of the results by addressing the issue of potential endogeneity of corruption.

Many studies investigate relationships between economic growth in specific economies and the development of its banking sector or between its growth rate and its rate of inflation. Advancing on earlier work, this article uses panel cointegration and causality tests applied to 34 OECD countries over the period 1960–2011. Our novel panel-data estimation procedure offers more robust estimates by utilizing variations between countries as well as variation over time. We identify important long-run causal links among the variables and show their implications for economic policy.

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 article investigates whether the European Community (EC) multilateral aid allocation process is characterised by certain biases. Using EC multilateral aid to 87 developing countries over the ten-year period 1986–95, we find evidence that EC aid favours smaller countries as well as those covered under the Lome Convention. In addition, we find some support for the notion that EC aid discriminates in favour of richer developing countries. The study concludes, therefore, that the EC's multilateral aid distribution is highly politicised.

Three questions regarding the relationship between untied assistance and donor country exports are investigated. First, do untied aid flows cause donor country exports to increase, reflecting the goodwill of the recipient towards the donor? Second, does strong export performance financially enable or politically encourage the donor country to increase its level of untied aid to the recipient? Third, does causality proceed in both directions simultaneously? Using German data for the period 1973–1995, results vary across subsamples defined according to the recipient countries' region, income and ties to Germany.

In the literature, three non-mutually exclusive approaches explain pension plan funding decisions: the traditional view (Friedman, 1983), the corporate view (Bodie et al., 1985) and the bonding view (Ippolito, 1985). An investigation of pension funding levels is presented here relying on an empirical model integrating these three different views. The results, based on data covering 115 relatively large Canadian firms in 1990, offer strong support for the bonding view.

In a world where workers have diminishing marginal utility from consumption and firms are profit-maximizers, this paper argues that workers inability to lend and borrow (i.e., imperfect capital markets) and firms' inability to monitor their employees' outside offers (i.e., asymmetric information) are jointly sufficient to explain: (1) why pension income and wage income are not perfect substitutes for workers; (2) how pensions--as deferred, contingent (on length of tenure) compensation--help to regulate labor turnover; (3) why pension payments are generally less than workers' final wages; (4) why workers receive their highest post-training wage in the last period of their working life; and (5) why wage profiles are not in general flat. Copyright 1991 by Royal Economic Society.

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.

This paper examines dynamic interactions between foreign direct investment (FDI) and economic growth using panel-data cointegration and causality tests. We present our results for 34 Eurasian countries for which previous research on this subject has not hitherto been performed. We find that that FDI and economic growth have both short-term and long-term causal linkages to each another and often to other identified variables. Our findings support the notion that donor countries supplying FDI tend to use FDI as an instrument of financial diplomacy. When the recipient countries experience enhanced economic growth through the FDI they receive, goodwill and more cordial relationships are fostered.

There is considerable interest in the relationship between military expenditure and economic growth, especially since Benoit's (1973, 1978) seminal work. Most studies of this linkage before our present work use a simple causality test. These results are unreliable or may be flawed, due to missing–variable bias and other limitations. This paper overcomes these deficiencies by deploying dynamic multivariate–causality tests applied to data from 22 countries over the period 1988–2012. Our novel panel–data estimation methods allow for more robust estimates by utilising variation between countries as well as variation over time. We find equilibrium relationships between military expenditure and economic growth and significant causality links deriving uniquely from our innovations.