Financial Development and Economic Growth Nexus In Turkey: Casuality Analysis Based On Bootsrap Approach

Emrah Eray Akça, Harun Bal, Müge Manga

Abstract


In this study, causality analysis were carried out to specify the relationship between financial development and economic growth using annual data for 1986-2016 period for Turkey. It was followed Leveraged Bootstrap Approach Procedure by Hacker and Hatemi-J (2006) to test causality between two variable. Even though findings obtained from causality analysis haven’t consensus from the point of view of all financial development indicators, they generally refer to one-way causality towards economic growth from financial development.

General results obtained from our study support evidence on supply-leading hypothesis. Demand-following hypothesis was only supported in the model which proxy of financial development is total domestic credit for private sector. Consequently, incouraging practices towards financial development contribute to positively economic development. Therefore, these practices should increase carefully and in a controlled manner.


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