Money, financial depth and economic growth in orthodox communist nations: the case of Cuba

ABSTRACT

The empirical literature on the nexus between finance and economic growth is vast, but two issues have been almost absent from it. One is the role of financial depth in communist countries with minimal market-oriented reforms. The other is the role of currency in circulation not only in these kinds of nations but also in underdeveloped countries, in general. This article investigates the nexus of banking deposits and currency in circulation with long-run economic growth in Cuba. We find a negative overall causality of deposits for economic growth. However, the currency was boosting growth. Our findings point at the relevance of currency for the private sector, and at multidimensional problems in the state-owned sector of Cuba.

KEYWORDS:

• Banks
• time-series models
• shadow economy
• financial economics

JEL CLASSIFICATION:

• C32
• O16
• O17
• P34

Acknowledgments

I would like to thank Professors Noritsugu Nakanishi and Mercedes García for their inspiration. Also, my gratitude to Professor Nicole Moskowitz for her invaluable proofreading.

Disclosure statement

The author does not have any Conflict of Interest to declare.

Data availability statement

The whole dataset is stored in the Mendeley repository under the DOI: 10.17632/wxgdyr5ppd.3 https://data.mendeley.com/datasets/wxgdyr5ppd/1

Notes

¹ The ADF (Dickey and Fuller 1979, (1981)) and the PP (Phillips and Perron (1988)) tests were performed, and the data satisfies both requirements. Results are available upon request.

Additional information

Funding

This research did not receive any grants from any funding agencies.