The Impact of Banks and Stock Market Development on Economic Growth in South Africa: an ARDL-bounds Testing Approach

• Autorzy: Sheilla Nyasha , Nicholas M. Odhiambo
• Języki publikacji: EN

Abstrakty

EN

This paper examines the impact of both bank- and market-based financial development on economic growth in South Africa during the period from 1980 to 2012. Unlike some previous studies, the current study employs means-removed average to construct both bank- and market-based financial development indices. The study uses the newly developed autoregressive distributed lag (ARDL) bounds testing approach to examine this linkage. The empirical results of this study show that there is a positive relationship between bank-based financial development and economic growth in South Africa. The results, however, fail to find any relationship between market-based financial development and economic growth in South Africa. The results apply irrespective of whether the regression analysis is conducted in the short run or in the long run. These results imply that it is bank-based financial development rather than market-based financial development that plays a pivotal role in propelling South Africa's real sector.(original abstract)

Słowa kluczowe

PL

Wzrost gospodarczy; Rynki finansowe; Rozwój bankowości; Studium przypadku

EN

Economic growth; Financial markets; Banking development; Case study

• Czasopismo: Contemporary Economics
• Rocznik: 2015
• Tom: 9
• Numer: nr 1
• Strony: 93-108

Twórcy

autor

Sheilla Nyasha

• UNISA - Department of Economics, South Africa

autor

Nicholas M. Odhiambo

• UNISA - Department of Economics, South Africa

Bibliografia

• Adjasi, C. K. D., & Biekpe, N. B. (2006). Stock market development and economic growth: The case of selected African countries. African Development Bank, 18 (1), 144-161.
• Adu, G., Marbuah, G., & Mensah, J. T. (2013). Financial development and economic growth in Ghana: Does the measure of financial development matter? Review of Development Finance, 3 (4), 192-203.
• Agbetsiafa, D. (2004). The finance growth nexus: evidence from sub-Saharan Africa. Savings and Development, 28 (3), 271-288.
• Ahmed, A. D. (2010). Financial liberalization, financial development and growth linkages in Sub Saharan African countries. An empirical investigation. Studies in Economics and Finance, 27 (4), 314-339.
• Ahmed, S. M., & Ansari, M. I. (1998). Financial sector development and economic growth: The South- Asian experience. Journal of Asian Economics, 9 (3), 503-517.
• Akinlo, A. E., & Akinlo, O. O. (2009). Stock market development and economic growth: Evidence from seven sub-Sahara African countries. Journal of Economics and Business, 61 (2), 162-171.
• Allen, F., & Gale, D. (1999). Diversity of opinion and the financing of new technologies. Journal of Financial Intermediation, 8 (1-2), 68-89.
• Andersen, T. B., & Tarp, F. (2003). Financial liberalization, financial development and economic growth in LDCs. Journal of International Development, 15 (2), 189-209.
• Bank of International Settlement. (2012b). The South African banking sector: An overview of the past 10 years. Retrieved from www.bis.org.
• Bank of International Settlement. (2012a). Address by the Governor of the South African Reserve Bank (1997) on financial sector reforms and their implications for the banking industry in South Africa. Retrieved from www.bis.org.
• Banking Association South Africa. (2010). South African banking sector overview. Retrieved from www. banking.org.za Bekaert, G., Harvey, C. R., & Lundblad, C. (2005). Does financial liberalization spur growth? Journal of Financial Economics, 77 (1), 3-55.
• Bernard, A. U., & Austin, A. (2011). The role of stock market development on economic growth in Nigeria: A time series analysis. African Research Review, 5 (6), 213-230.
• Buffie, E. F. (1984). Financial repression, the new structuralists, and stabilisation policy in semi-industrialized economics. Journal of Development Economics, 14 (3), 305-322.
• Caporale, G. M., Howells, P. G. A. , & Soliman, A. M. (2003). Stock market development and economic growth: The causal linkage. Journal of Economic Development, 29 (1), 33-50.
• Christopoulos, D. K., & Tsionas, E. G. (2004). Financial development and economic growth: evidence from panel unit root and cointegration tests. Journal of Development Economics, 73 (1), 55-74.
• De Gregorio, J., & Guidotti, P. E. (1995). Financial development and economic growth. World Development, 23 (3), 433-448.
• Demirguc-Kunt, A., & Levine, R. (1996). Stock market development and financial intermediaries: stylized facts. World Bank Economic Review, 10 (2), 291-321.
• Engle, R. F., & Granger, C. J. (1987). Cointegration and error-correction - representation, estimation and testing. Econometrica, 55 (2), 251-278.
• Gelb, A. H. (1989). Financial policies, growth, and efficiency (Working Paper No. 202). World Bank.
• Ghirmay, T. (2004). Financial development and economic growth in sub-Saharan African countries: Evidence from time series analysis. African Development Review, 16 (3), 415-432.
• Goldsmith, R. W. (1969). Financial Structure and Development. New Haven, CT: Yale University Press.
• Güryay, E., Şafakli, O. V., & Tüzel, B. (2007). Financial development and economic growth: Evidence from Northern Cyprus. International Research Journal of Finance and Economics, 8 (2), 57-62.
• Hassan, K. M., Sanchez, B., & Yu, J. (2011). Financial development and economic growth: new evidence from panel data. The Quarterly Review of Economics and Finance, 51 (1), 88-104.
• Hoshi, T., Kashyap, A., & Scharfstein, D. (1990). The role of banks in reducing the costs of financial distress in Japan. Journal of Financial Economics, 27 (1), 67-88.
• Johannesburg Stock Exchange. (2012). History and company overview. Retrieved from http://www. jse.co.za/Home.aspx.
• Johannesburg Stock Exchange. (2014). Historical market data. Retrieved from https://www.jse.co.za/ services/market-data/historical-data.
• Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12 (2-3), 231-254.
• Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector Autoregressive Models. Econometrica, 59 (6), 1551- 1580.
• Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration - with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52 (2), 169-210.
• Kargbo, S. M., & Adamu, P. A. (2009). Financial development and economic growth in Sierra Leone. West African Journal of Monetary and Economic Integration, 9 (2), 30-61.
• King, R. G., & Levine, R. (1993a). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics, 108 (3), 717-737.
• King, R. G., & Levine, R. (1993b). Finance, entrepreneurship, and growth: theory and evidence. Journal of Monetary Economics, 32 (3), 513-542.
• Levine, R. (2004). Finance and growth: theory and evidence (Working Paper No. 10766). National Bureau of Economic Research.
• Levine, R., & Zervos, S. (1996). Stock market development and long run growth. World Bank Economic Review, 10 (2), 323-340.
• Lucas, R. (1988). On the mechanism of economic development. Journal of Monetary Economics, 22 (1), 3-42.
• Majid, M. S. A. (2008). Does financial development matter for economic growth in Malaysia? An ARDL bound testing approach. Journal of economic Cooperation, 29 (1), 61-82.
• Masoud, N., & Hardaker, G. (2012). The impact of financial development on economic growth: analysis of emerging market countries. Studies in Economics and Finance, 29 (3), 148-173.
• Mayer, C. (1988). New issues in corporate finance. European Economic Review, 32 (5), 1167-1183.
• McKinnon, R. I. (1973). Money and capital in economic development. Washington, D.C: Brookings Institution.
• Nurudeen, A. (2009). Does stock market development raise economic growth? Evidence from Nigeria. The Review of Finance and Banking, 1 (1), 15-26.
• Odedokun, M. O. (1996). Alternative econometric approaches for analyzing the role of the financial sector in economic growth: time-series evidence from LDCs. Journal of Development Economics, 50 (1), 119-146.
• Odhiambo, N. M. (2008). Financial depth, savings and economic growth in Kenya: A dynamic causal linkage. Economic Modelling, 25 (4), 704-713.
• Odhiambo, N. M. (2009). Savings and economic growth in South Africa: A multivariate causality test. Journal of Policy Modeling, 31 (5), 708-718.
• Odhiambo, N. M. (2011). Financial intermediaries versus financial markets: A South African experience. International Business & Economics Research Journal, 10 (2), 77-84.
• Perron, P. (1997). Further evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics, 80 (2), 355-385.
• Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modeling approach to cointegration analysis In S. Strom (Ed.), Econometrics and economic theory in the 20th century. The Ragnar Frisch Centennial Symposium Econometric Society monographs (No. 31) (pp. 371-413). Cambridge, UK: Cambridge University Press.
• Pesaran, M. H., Shin, Y., & Smith, R. (2001). Bound testing approaches to the analysis of level relationship. Journal of Applied Econometrics, 16 (3), 289-326.
• Pollin, R. (1995). Financial structures and egalitarian economic policy. New Left Review, 214, 26-61.
• Ram, R. (1999). Financial development and economic growth: Additional evidence. Journal of Development Studies, 35 (4), 164-174.
• Roubini, N., & Salai Martin, X. (1992). Financial repression and economic growth. Journal of Development Economics, 39 (1), 5-30.
• Robinson, J. (1952). The generalisation of the general theory, In J. Robinson (Eds.), The Rate of interest and other essays (pp. 69-142). London, UK: Macmillan.
• Schumpeter, J. A. (2012). The theory of economic development. An inquiry into profits, capital, credit, interest, and the business cycle (16th ed.). New Brunswick, NJ: Transaction Publishers.
• Shaw, E. S. (1973). Financial deepening in economic development. New York, NY: Oxford University Press.
• Stern, N. (1989). The economics of development: a survey. Economic Journal, 99 (397), 597-685.
• Ujunwa, A., & Salami, O. P. (2010). Stock market development and economic growth: Evidence from Nigeria. European Journal of Economics, Finance and Administrative Sciences, 25, 44-53.
• Van Wijnbergen, S. 1983. Credit policy, inflation and growth in a financially repressed economy. Journal of Development Economics, 13 (1), 45-65.
• World Bank. (2014). World Bank Development Indicators. Retrieved from http://data.worldbank.org/ topic/financial-sector.

Identyfikatory

DOI

10.5709/ce.1897-9254.161