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Does Financial Development Enhance Economic Growth? The Case of Turkic Countries

Year 2023, Issue: 106, 55 - 76, 28.07.2023
https://doi.org/10.12995/bilig.10603

Abstract

In this study, we investigate whether financial development enhances economic growth in Turkic countries, namely, Azerbaijan, Kazakhstan, Kyrgyzstan, and Türkiye from 1995 to 2017. The financial development index is obtained from the International Monetary Fund to proxy for the level of financial development. The index shows the level of development of financial institutions and financial markets in terms of depth, access, and efficiency. The annual percentage growth rate of GDP per capita based on constant local currency is taken as an indicator of economic growth. The main result of the analysis shows that there is a positive relationship between financial development and economic growth. The result is robust using random effect regression, adding inflation, and including Banking Z Score. However, the main impact can be seen in the financial institution instead of the financial market proxy. The results support the supply-leading hypothesis for the economies of four Turkic countries.

References

  • Ağayev, Seymur. “Geçiş Ekonomilerinde Finansal Gelişme ve Ekonomik Büyüme İlişkisi.” Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi, vol. 32, no. 1, 2012, pp. 155-164.
  • Andrés, Javier, Ignacio Hernando, and J. David López-Salido. “The Role of the Financial System in the Growth–Inflation Link: The OECD Experience.” European Journal of Political Economy, vol. 20, no.4, 2004, pp. 941-961.
  • Arestis, Philip, and Panicos Demetriades. “Financial Development and Economic Growth: Assessing the Evidence.” The Economic Journal, vol. 107, no. 442, 1997, pp. 783-799.
  • Barro, Robert J. “Inflation and Economic Growth.” Annals of Economics and Finance, vol. 14, no. 1, 2013, pp. 85-109.
  • Beck, Thorsten, and Ross Levine. “Stock Markets, Banks, and Growth: Panel Evidence.” Journal of Banking & Finance, vol. 28, no. 3, 2004, pp. 423-442.
  • Beck, Thorsten, Ross Levine, and Norman Loayza. “Finance and the Sources of Growth.” Journal of Financial Economics, vol. 58, no. 1-2, 2000, pp. 261-300.
  • Calderon, César, and Lin Liu. “The Direction of Causality between Financial Development and Economic Growth.” Journal of Development Economics, vol. 72, no. 1, 2003, pp. 321-334.
  • Christopoulos, Dimitris K., and Efthymios G. Tsionas. “Financial Development and Economic Growth: Evidence from Panel Unit Root and Cointegration Tests.” Journal of Development Economics, vol. 73, no. 1, 2004, pp. 55-74.
  • Demirgüç-Kunt, Asli. “Finance and economic development: Policy Choices for
  • Developing Countries.” World Bank Policy Research Working Paper no. 3955, 2006.
  • Demirgüç-Kunt, Asli, and Ross Levine. “Finance, Financial Sector Policies, and Long-Run Growth.” World Bank Policy Research Working Paper no. 4469, 2008.
  • Gries, Thomas, Manfred Kraft, and Daniel Meierrieks. “Linkages Between Financial Deepening, Trade Openness, and Economic Development: Causality Evidence from Sub-Saharan Africa.” World Development, vol. 37, no. 12, 2009, pp. 1849-1860.
  • Güneş, Sevcan. “Finansal Gelişmişlik ve Büyüme Arasindaki Nedensellik Testi: Türkiye Örneği.” Doğuş Üniversitesi Dergisi, vol. 14, no. 1, 2013, pp. 73-85.
  • Helhel, Yeşim. “Financial Development and Economic Growth Relationship: An Analysis with Credit Based Financial Index.” Business and Economics Research Journal, vol. 9, no. 4, 2018, pp. 761-771.
  • Hsueh, Shun-Jen, Yu-Hau Hu, and Chien-Heng Tu. “Economic Growth and Financial Development in Asian Countries: A Bootstrap Panel Granger Causality Analysis.” Economic Modelling, vol. 32, May 2013, pp. 294-301.
  • Jenkins, Hatice Pehlivan, and Salih Turan Katırcıoglu. “The Bounds Test Approach for Cointegration and Causality Between Financial Development, International Trade and Economic Growth: The Case of Cyprus.” Applied Economics, vol. 42, no. 13, 2010, pp. 1699-1707.
  • Jung, Woo S. “Financial Development and Economic Growth: International Evidence.” Economic Development and Cultural Change, vol. 34, no. 2, 1986, pp. 333-346.
  • King, Robert G., and Ross Levine. “Finance and Growth: Schumpeter Might Be Right.” The Quarterly Journal of Economics, vol. 108, no. 3, 1993, pp. 717-737.
  • Kumar, Ronald Ravinesh, et al. “The effect of remittances on economic growth in Kyrgyzstan and Macedonia: Accounting for financial development.” International Migration, vol. 56, no. 1, 2018, pp. 95- 126.
  • Kyophilavong, Phouphet, Gazi Salah Uddin, and Muhammad Shahbaz. “The Nexus Between Financial Development and Economic Growth in Lao PDR.” Global Business Review, vol. 17, no. 2, 2016, pp. 303-317.
  • La Porta, Rafael, Florencio Lopez‐de‐Silanes, Andrei Shleifer, and Robert W. Vishny. “Law and Finance.” Journal of Political Economy, vol. 106, no. 6, 1998, pp. 1113-1155.
  • Levine, Ross, Norman Loayza, and Thorsten Beck. “Financial Intermediation and Growth: Causality and Causes.” Journal of Monetary Economics, vol. 46, no. 1, 2000, pp. 31-77.
  • Levine, Ross. “Financial Development and Economic Growth: Views and Agenda.” Journal of Economic Literature, vol. 35, no. 2, 1997, pp. 688-726.
  • Levine, Ross. “The Corporate Governance of Banks: A Concise Discussion of Concepts and Evidence.” World Bank Policy Research Working Paper no. 3404, 2004.
  • Levine, Ross, and Sara Zervos. “Stock Markets, Banks, and Economic Growth.” American Economic Review, vol. 88, no. 3, 1998, pp. 537-558.
  • Lucas Jr, Robert E. “On the Mechanics of Economic Development.” Journal of Monetary Economics, vol. 22, no. 1, 1988, pp. 3-42.
  • Müslümov, Alövsat, and Güler Aras. “Sermaye Piyasasi Gelişmesi ve Ekonomik Büyüme Arasinda Nedensellik İlişkisi: OECD Ülkeleri Örneği.” İktisat İşletme ve Finans, vol. 17, no. 198, 2002, pp. 90-100.
  • Nkoro, Emeka, and Aham Kelvin Uko. “Financial Sector Development-Economic Growth Nexus: Empirical Evidence from Nigeria.” American International Journal of Contemporary Research, vol. 3, no. 2, 2013, pp. 87-94.
  • Ozturk, Ilhan. “Financial development and economic growth: Evidence from Turkey.” Applied Econometrics and International Development, vol. 8, no. 1, 2008, pp. 85-98.
  • Öztürk, Nurettin, Havva Kılıç Darıcı, and Ferdi Kesikoğlu. “Ekonomik Büyüme ve Finansal Gelisme İlişkisi: Gelişmekte Olan Piyasalar İçin Bir Panel Nedensellik Analizi.” Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi, vol. 30, no. 1, 2011, pp. 53-69.
  • Pagano, Marco. “Financial Markets and Growth: An Overview.” European Economic Review, vol. 37, no. 2-3, 1993, pp. 613-622.
  • Patrick, Hugh T. “Financial Development and Economic Growth in Underdeveloped Countries”. Economic Development and Cultural Change, vol. 14, no. 2, 1966, pp. 174-189.
  • Ram, Rati. “Financial Development and Economic Growth: Additional Evidence.” The Journal of Development Studies, vol. 35, no. 4, 1999, pp. 164-174.
  • Samargandi, Nahla, Jan Fidrmuc, and Sugata Ghosh. “Is the Relationship between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries.” World Development, vol. 68, April 2015, pp. 66-81.
  • Schumpeter, Joseph A. The Theory of Economic Development. Cambridge, MA: Harvard University Press, 1911.
  • Shahbaz, Muhammad. “Financial development, economics growth, income inequality nexus: A case study of Pakistan.” International Journal of Economics and Empirical Research (IJEER), vol. 1, no. 3, 2013, pp. 24-47.
  • Shan, Jordan, and Alan Morris. “Does Financial Development ‘Lead’ Economic Growth?” International Review of Applied Economics, vol. 16, no. 2, 2002, pp. 153-168.
  • Shan, Jordan Z., Alan G. Morris, and Fiona Sun. “Financial Development and Economic Growth: An Egg‐And‐Chicken Problem?” Review of International Economics, vol. 9, no. 3, 2001, pp. 443-454.
  • Solow, Robert M. “A Contribution to The Theory of Economic Growth.” The Quarterly Journal of Economics, vol. 70, no. 1, 1956, pp. 65-94.
  • Tufaner, Mustafa Batuhan. “Trade liberalization, financial development, and economic growth: A panel Data Analysis on Turkey and the Turkic Republics.” Economic Journal of Emerging Markets, vol. 14, no. 1, 2022, pp. 126-137.
  • Türkoğlu, Musa. “Türkiye’de Finansal Gelişmenin Ekonomik Büyümeye Etkileri: Nedensellik Analizi.” Nevşehir Hacı Bektaş Veli Üniversitesi SBE Dergisi, vol. 6, no.1, 2016, pp. 84-93.

Finansal Gelişme Ekonomik Büyümeyi Artırır mı? Türk Cumhuriyetleri Örneği

Year 2023, Issue: 106, 55 - 76, 28.07.2023
https://doi.org/10.12995/bilig.10603

Abstract

Bu çalışmada, 1995-2017 yılları arasında Türk Cumhuriyetleri olarak anılan Azerbaycan, Kazakistan, Kırgızistan ve Türkiye örnekleminde finansal gelişme ve ekonomik büyüme arasındaki ilişki analiz edilmiştir. Analizde finansal gelişmişlik düzeyi göstergesi olarak IMF’den elde edilen finansal gelişmişlik endeksi kullanılmıştır. Endeks, finansal kurumların ve finansal piyasaların derinlik, erişim ve
verimlilik açısından gelişmişlik düzeyini göstermektedir. Sabit yerel para birimine göre kişi başına düşen GSYİH’nin yıllık yüzde büyüme oranı, ekonomik büyümenin göstergesi olarak alınmıştır. Analizin sonucuna göre, anılan ülkelerde finansal gelişme ile ekonomik büyüme arasında pozitif bir ilişki mevcuttur. Sonuçlar analize enflasyonu ve Bankacılık Z Skorunu dâhil ederek Rassal Modeli ile doğrulanmıştır. Ancak asıl etki, finansal piyasa endeksi yerine finansal kurumlar endeksinde görülmektedir. Sonuçlar aynı zamanda ekonomik büyüme ile finansal gelişme arasında Granger nedensellik olmadığını da göstermektedir. Sonuçlar, anılan ülke ekonomileri için Arz Öncüllü Hipotezi desteklemektedir.

References

  • Ağayev, Seymur. “Geçiş Ekonomilerinde Finansal Gelişme ve Ekonomik Büyüme İlişkisi.” Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi, vol. 32, no. 1, 2012, pp. 155-164.
  • Andrés, Javier, Ignacio Hernando, and J. David López-Salido. “The Role of the Financial System in the Growth–Inflation Link: The OECD Experience.” European Journal of Political Economy, vol. 20, no.4, 2004, pp. 941-961.
  • Arestis, Philip, and Panicos Demetriades. “Financial Development and Economic Growth: Assessing the Evidence.” The Economic Journal, vol. 107, no. 442, 1997, pp. 783-799.
  • Barro, Robert J. “Inflation and Economic Growth.” Annals of Economics and Finance, vol. 14, no. 1, 2013, pp. 85-109.
  • Beck, Thorsten, and Ross Levine. “Stock Markets, Banks, and Growth: Panel Evidence.” Journal of Banking & Finance, vol. 28, no. 3, 2004, pp. 423-442.
  • Beck, Thorsten, Ross Levine, and Norman Loayza. “Finance and the Sources of Growth.” Journal of Financial Economics, vol. 58, no. 1-2, 2000, pp. 261-300.
  • Calderon, César, and Lin Liu. “The Direction of Causality between Financial Development and Economic Growth.” Journal of Development Economics, vol. 72, no. 1, 2003, pp. 321-334.
  • Christopoulos, Dimitris K., and Efthymios G. Tsionas. “Financial Development and Economic Growth: Evidence from Panel Unit Root and Cointegration Tests.” Journal of Development Economics, vol. 73, no. 1, 2004, pp. 55-74.
  • Demirgüç-Kunt, Asli. “Finance and economic development: Policy Choices for
  • Developing Countries.” World Bank Policy Research Working Paper no. 3955, 2006.
  • Demirgüç-Kunt, Asli, and Ross Levine. “Finance, Financial Sector Policies, and Long-Run Growth.” World Bank Policy Research Working Paper no. 4469, 2008.
  • Gries, Thomas, Manfred Kraft, and Daniel Meierrieks. “Linkages Between Financial Deepening, Trade Openness, and Economic Development: Causality Evidence from Sub-Saharan Africa.” World Development, vol. 37, no. 12, 2009, pp. 1849-1860.
  • Güneş, Sevcan. “Finansal Gelişmişlik ve Büyüme Arasindaki Nedensellik Testi: Türkiye Örneği.” Doğuş Üniversitesi Dergisi, vol. 14, no. 1, 2013, pp. 73-85.
  • Helhel, Yeşim. “Financial Development and Economic Growth Relationship: An Analysis with Credit Based Financial Index.” Business and Economics Research Journal, vol. 9, no. 4, 2018, pp. 761-771.
  • Hsueh, Shun-Jen, Yu-Hau Hu, and Chien-Heng Tu. “Economic Growth and Financial Development in Asian Countries: A Bootstrap Panel Granger Causality Analysis.” Economic Modelling, vol. 32, May 2013, pp. 294-301.
  • Jenkins, Hatice Pehlivan, and Salih Turan Katırcıoglu. “The Bounds Test Approach for Cointegration and Causality Between Financial Development, International Trade and Economic Growth: The Case of Cyprus.” Applied Economics, vol. 42, no. 13, 2010, pp. 1699-1707.
  • Jung, Woo S. “Financial Development and Economic Growth: International Evidence.” Economic Development and Cultural Change, vol. 34, no. 2, 1986, pp. 333-346.
  • King, Robert G., and Ross Levine. “Finance and Growth: Schumpeter Might Be Right.” The Quarterly Journal of Economics, vol. 108, no. 3, 1993, pp. 717-737.
  • Kumar, Ronald Ravinesh, et al. “The effect of remittances on economic growth in Kyrgyzstan and Macedonia: Accounting for financial development.” International Migration, vol. 56, no. 1, 2018, pp. 95- 126.
  • Kyophilavong, Phouphet, Gazi Salah Uddin, and Muhammad Shahbaz. “The Nexus Between Financial Development and Economic Growth in Lao PDR.” Global Business Review, vol. 17, no. 2, 2016, pp. 303-317.
  • La Porta, Rafael, Florencio Lopez‐de‐Silanes, Andrei Shleifer, and Robert W. Vishny. “Law and Finance.” Journal of Political Economy, vol. 106, no. 6, 1998, pp. 1113-1155.
  • Levine, Ross, Norman Loayza, and Thorsten Beck. “Financial Intermediation and Growth: Causality and Causes.” Journal of Monetary Economics, vol. 46, no. 1, 2000, pp. 31-77.
  • Levine, Ross. “Financial Development and Economic Growth: Views and Agenda.” Journal of Economic Literature, vol. 35, no. 2, 1997, pp. 688-726.
  • Levine, Ross. “The Corporate Governance of Banks: A Concise Discussion of Concepts and Evidence.” World Bank Policy Research Working Paper no. 3404, 2004.
  • Levine, Ross, and Sara Zervos. “Stock Markets, Banks, and Economic Growth.” American Economic Review, vol. 88, no. 3, 1998, pp. 537-558.
  • Lucas Jr, Robert E. “On the Mechanics of Economic Development.” Journal of Monetary Economics, vol. 22, no. 1, 1988, pp. 3-42.
  • Müslümov, Alövsat, and Güler Aras. “Sermaye Piyasasi Gelişmesi ve Ekonomik Büyüme Arasinda Nedensellik İlişkisi: OECD Ülkeleri Örneği.” İktisat İşletme ve Finans, vol. 17, no. 198, 2002, pp. 90-100.
  • Nkoro, Emeka, and Aham Kelvin Uko. “Financial Sector Development-Economic Growth Nexus: Empirical Evidence from Nigeria.” American International Journal of Contemporary Research, vol. 3, no. 2, 2013, pp. 87-94.
  • Ozturk, Ilhan. “Financial development and economic growth: Evidence from Turkey.” Applied Econometrics and International Development, vol. 8, no. 1, 2008, pp. 85-98.
  • Öztürk, Nurettin, Havva Kılıç Darıcı, and Ferdi Kesikoğlu. “Ekonomik Büyüme ve Finansal Gelisme İlişkisi: Gelişmekte Olan Piyasalar İçin Bir Panel Nedensellik Analizi.” Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi, vol. 30, no. 1, 2011, pp. 53-69.
  • Pagano, Marco. “Financial Markets and Growth: An Overview.” European Economic Review, vol. 37, no. 2-3, 1993, pp. 613-622.
  • Patrick, Hugh T. “Financial Development and Economic Growth in Underdeveloped Countries”. Economic Development and Cultural Change, vol. 14, no. 2, 1966, pp. 174-189.
  • Ram, Rati. “Financial Development and Economic Growth: Additional Evidence.” The Journal of Development Studies, vol. 35, no. 4, 1999, pp. 164-174.
  • Samargandi, Nahla, Jan Fidrmuc, and Sugata Ghosh. “Is the Relationship between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries.” World Development, vol. 68, April 2015, pp. 66-81.
  • Schumpeter, Joseph A. The Theory of Economic Development. Cambridge, MA: Harvard University Press, 1911.
  • Shahbaz, Muhammad. “Financial development, economics growth, income inequality nexus: A case study of Pakistan.” International Journal of Economics and Empirical Research (IJEER), vol. 1, no. 3, 2013, pp. 24-47.
  • Shan, Jordan, and Alan Morris. “Does Financial Development ‘Lead’ Economic Growth?” International Review of Applied Economics, vol. 16, no. 2, 2002, pp. 153-168.
  • Shan, Jordan Z., Alan G. Morris, and Fiona Sun. “Financial Development and Economic Growth: An Egg‐And‐Chicken Problem?” Review of International Economics, vol. 9, no. 3, 2001, pp. 443-454.
  • Solow, Robert M. “A Contribution to The Theory of Economic Growth.” The Quarterly Journal of Economics, vol. 70, no. 1, 1956, pp. 65-94.
  • Tufaner, Mustafa Batuhan. “Trade liberalization, financial development, and economic growth: A panel Data Analysis on Turkey and the Turkic Republics.” Economic Journal of Emerging Markets, vol. 14, no. 1, 2022, pp. 126-137.
  • Türkoğlu, Musa. “Türkiye’de Finansal Gelişmenin Ekonomik Büyümeye Etkileri: Nedensellik Analizi.” Nevşehir Hacı Bektaş Veli Üniversitesi SBE Dergisi, vol. 6, no.1, 2016, pp. 84-93.
There are 41 citations in total.

Details

Primary Language English
Subjects Financial Economy, Studies of the Turkic World
Journal Section Articles
Authors

Emin Hüseyin Çetenak 0000-0003-2900-4948

Özkan Haykır This is me

Özlem Öztürk Çetenak This is me

Publication Date July 28, 2023
Published in Issue Year 2023 Issue: 106

Cite

APA Çetenak, E. H., Haykır, Ö., & Öztürk Çetenak, Ö. (2023). Does Financial Development Enhance Economic Growth? The Case of Turkic Countries. Bilig(106), 55-76. https://doi.org/10.12995/bilig.10603
AMA Çetenak EH, Haykır Ö, Öztürk Çetenak Ö. Does Financial Development Enhance Economic Growth? The Case of Turkic Countries. Bilig. July 2023;(106):55-76. doi:10.12995/bilig.10603
Chicago Çetenak, Emin Hüseyin, Özkan Haykır, and Özlem Öztürk Çetenak. “Does Financial Development Enhance Economic Growth? The Case of Turkic Countries”. Bilig, no. 106 (July 2023): 55-76. https://doi.org/10.12995/bilig.10603.
EndNote Çetenak EH, Haykır Ö, Öztürk Çetenak Ö (July 1, 2023) Does Financial Development Enhance Economic Growth? The Case of Turkic Countries. Bilig 106 55–76.
IEEE E. H. Çetenak, Ö. Haykır, and Ö. Öztürk Çetenak, “Does Financial Development Enhance Economic Growth? The Case of Turkic Countries”, Bilig, no. 106, pp. 55–76, July 2023, doi: 10.12995/bilig.10603.
ISNAD Çetenak, Emin Hüseyin et al. “Does Financial Development Enhance Economic Growth? The Case of Turkic Countries”. Bilig 106 (July 2023), 55-76. https://doi.org/10.12995/bilig.10603.
JAMA Çetenak EH, Haykır Ö, Öztürk Çetenak Ö. Does Financial Development Enhance Economic Growth? The Case of Turkic Countries. Bilig. 2023;:55–76.
MLA Çetenak, Emin Hüseyin et al. “Does Financial Development Enhance Economic Growth? The Case of Turkic Countries”. Bilig, no. 106, 2023, pp. 55-76, doi:10.12995/bilig.10603.
Vancouver Çetenak EH, Haykır Ö, Öztürk Çetenak Ö. Does Financial Development Enhance Economic Growth? The Case of Turkic Countries. Bilig. 2023(106):55-76.

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