Financial Development and Economic Growth: Evidence from Lebanon

Wadad Saad

Abstract


The objective of this study is to determine whether a relationship exists between financial development and economic growth in Lebanon. The investigation of this link is carried out within a VECM framework over the period 1972–2012. This study uses the VECM-based Granger-causality test to provide empirical evidence of the causal relationship between financial development and economic growth. The evidence suggests that the credit market is still underdeveloped in this country and its contribution to economic growth is limited owing to a lack of financial depth. Therefore, the focus is on the banking sector to measure the financial development. The findings indicate the presence of a positive relationship between financial development and economic growth in the short run that is accompanied by bidirectional Granger causality between these variables. However this relationship is found to be insignificant in the long run. Moreover, the results indicate that the efficiency of the banking sector has an important role in the Lebanese economic growth.

Full Text: PDF DOI: 10.5539/ijef.v6n8p173

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.