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

Abstract

In the last few decades, although there have been many studies examined the relationship between financial development and economic growth, it seems that no consensus has been reached due to the diversity of variables and the methods used in the analyses. This article examines the relationship between financial development and economic growth (GDP) by using panel data analysis for BRICS Countries and Turkey. The analysis covers 21 years between 1996-2016. Variables used for financial development 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 statistically significant 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 in the long-term. While TRADE affects GDP positively, BMONEY affects growth negatively in the short-term. CREDIT is not statistically significant neither in the short-term nor in the long-term. There is unidirectional causality from MSCI to GDP, from GDP to MBROAD, from MSCI to TRADE and from MBROAD to TRADE. There is not a causality between MBROAD and MSCI, while there is a bidirectional causality between TRADE and GDP. Therefore, it is not certain if financial growth is the determinant of economic growth for selected variables and the countries in the period of 1996-2016.

Keywords

• i̇ktisadi büyüme
• finansal gelişme
• panel veri analizi
• brics ülkeleri
• türkiye
• economic growth
• financial development
• panel data analysis
• bircs countries
• turkey