FINANCIAL DEEPENING AND ECONOMIC GROWTH: A CASE OF TURKEY

Authors : Kemal ERKİŞİ, Turgay CEYHAN

Pages : 97-125

View : 33 | Download : 9

Publication Date : 2019-08-01

Article Type : Research Paper

Abstract :In this study, the relationship between economic growth insert ignore into journalissuearticles values(EG); and financial deepening insert ignore into journalissuearticles values(FD); in Turkey was explored by using the yearly data belongs to GDP, Bonds and domestic credits for the period between 1994 – 2017.   “LSQ Method, Variance Inflation Factor Test, Normality Histogram Test, Correlogram Q-Statistics Test and Heteroscedasticity Test” were employed and results indicated that the variables and the model are significant. Granger causality analysis was conducted to define the short-term causality among the variables. It is concluded : insert ignore into journalissuearticles values(a); there is a positive bidirectional causality between economic growth and domestic credit provided by financial sector, insert ignore into journalissuearticles values(b); there is a positive unidirectional causality from bonds to economic growth and insert ignore into journalissuearticles values(c); there is not a relationship between domestic credits and bonds. To investigate whether a long-term relationship among the series, “Johansen Cointegration Test” was employed. The results indicated that there is a long-term relationship between the economic growth and financial development. By implementing “Variance Decomposition Technique”, it is concluded that economic growth is explained by 67% GDP, 8% BONDS and by 23% CREDIT.   The results of this research support the Mutual Interaction Hypothesis that asserts a bidirectional relationship between FD and EG and in this context, financial deepening has an important place in terms of sustainable economic growth.
Keywords : Economic Growth, Financial Development, Var Granger Causality Analysis, Johansen Cointegration Analysis

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