The causal interaction between financial development and human development in Bangladesh

ABSTRACT

This note investigates the causal relationship between financial development measured as the domestic credit to private sector (% of GDP) and human development measured by the Barro–Lee index in Bangladesh. The bootstrap causality tests with leverage adjustments are implemented in order to avoid any distributional assumption. It is found that human development is causing financial development. However, there is no significant causality running from financial development on human development. The policy implication of these empirical findings is also elaborated.

KEYWORDS:

• Human development
• financial development
• bootstrap simulations
• Bangladesh

JEL CLASSIFICATION:

• F43
• E44
• C32

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ This information criterion is suggested by Hatemi-J (2003, 2008).

² For the description of the bootstrap simulations with leverage adjustments see Hacker and Hatemi-J (2006, 2012). The simulations are implemented via a Gauss code written by Hacker and Hatemi-J (2010).

Additional information

Funding

This work was supported by the United Arab Emirates University [grant number UPAR 2013].