Causality and state dependence in the finance-growth nexus: an empirical investigation

Walle, Yabibal Mulualem

Whether financial development promotes economic growth or not has been a contentious research question over the past century. This thesis is an empirical contribution to two main issues in the area: causality and state dependence. Chapter 2 presents extensive Monte Carlo simulation results on the finite sample performance comparisons of heteroskedasticity-robust panel unit root tests . The long-run finance-growth causality is discussed in Chapters 2--3 by means of panel unit root and and panel cointegration tests. The causality in the short-to-medium run is explored in Chapter 4. Chapter 5 investigates state dependence in the finance-growth nexus using a functional coefficient modeling approach. Application of this approach proceeds further to Chapter 6, this time with a special emphasis on trade and financial openness as factors underlying the finance-growth link. Concluding remarks are provided in Chapter 7.

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Walle, Yabibal: Causality and state dependence in the finance-growth nexus: an empirical investigation. 2013.

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