Causal relation between economic growth and domestic credit in the economic globalization: Evidence from the Hatemi-J's test

Abstract

This paper empirically examines causality relationship between economic growth and domestic credit in the economic globalization in 58 developed and developing countries over the period 1970–2010. We use the asymmetric Granger causality test that is based on modified Wald test statistics within bootstrapped critical values. We find a significant causality from domestic credit to economic growth only in seven developing countries. Furthermore, there is a unidirectional causality from economic growth to domestic credit in five developed and 10 developing economies.

Keywords:

• economic globalization
• economic growth
• domestic credit
• causality analysis
• bootstrapping

JEL Classifications:

• F02
• F36
• E51

Acknowledgements

I would like to thank the editor (David E.A. Giles) as well as the anonymous referee for their valuable comments and suggestions which substantially improved the paper.

Notes

1. See Singh (2010) for a recent survey of the related literature.

2. Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Cameron, Canada, the Central African Republic, Chad, Chile, Colombia, Republic of Congo, Costa Rica, Denmark, the Dominican Republic, Ecuador, Egypt, El Salvador, Finland, France, Gabon, Ghana, Greece, Guatemala, Honduras, Iceland, India, Ireland, Israel, Italy, Jamaica, Japan, Republic of Korea, Malaysia, Mexico, Morocco, Nepal, the Netherlands, New Zealand, Nicaragua, Nigeria, Pakistan, Panama, Paraguay, Peru, the Philippines, Portugal, Spain, Sweden, Syria, Thailand, Trinidad and Tobago, Turkey, the United Kingdom, the United States, Uruguay, and Venezuela.

3. All of data are in first differenced, and also they expect to be stationary.

4. See Hatemi-J (2003) to select true lag order in the causality analysis.

5. The bootstrapped critical values can be generated for 1%, 5%, and 10% statistical significance levels within his Gauss codes.