Financial Development and Economic Growth in BRICS Countries and Turkey: A Panel Data Analysis

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İstanbul Gelişim Üniversitesi Sosyal Bilimler Dergisi, vol.5, no.2, pp.1-17, 2018 (Peer-Reviewed Journal) identifier


In the last few decades, although there have been many studies examined therelationship between financial development and economic growth, it seems that noconsensus has been reached due to the diversity of variables and the methods used inthe analyses. This article examines the relationship between financial development andeconomic growth (GDP) by using panel data analysis for BRICS Countries and Turkey.The analysis covers 21 years between 1996-2016. Variables used for financialdevelopment are Morgan Stanley Capital International Index (MSCI), Credits (CREDIT),money supply (BMONEY), foreign trade (TRADE).According to the result of the analysis; MSCI is the only variable that statisticallysignificant and so affects GDP positively both in the long-term and the short-term.BMONEY and TRADE variables are statistically significant in the short-term, but not inthe long-term. While TRADE affects GDP positively, BMONEY affects growth negativelyin the short-term. CREDIT is not statistically significant neither in the short-term nor inthe long-term. There is unidirectional causality from MSCI to GDP, from GDP toMBROAD, from MSCI to TRADE and from MBROAD to TRADE. There is not a causalitybetween MBROAD and MSCI, while there is a bidirectional causality between TRADE andGDP. Therefore, it is not certain if financial growth is the determinant of economicgrowth for selected variables and the countries in the period of 1996-2016.