The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countries
Financial development and its relationships with economic growth and income inequality have recently received considerable attention. The present study investigates the relationships between financial development and (i) economic growth, using data from 44 countries; (ii) economic inequality, using...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2022-12-01
|
| Series: | Development Studies Research |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/21665095.2022.2065325 |
| _version_ | 1817983864685985792 |
|---|---|
| author | Zaheer Abbas Gul Afshan Ghulam Mustifa |
| author_facet | Zaheer Abbas Gul Afshan Ghulam Mustifa |
| author_sort | Zaheer Abbas |
| collection | DOAJ |
| description | Financial development and its relationships with economic growth and income inequality have recently received considerable attention. The present study investigates the relationships between financial development and (i) economic growth, using data from 44 countries; (ii) economic inequality, using data from 42 middle-income countries. Estimates are obtained through a panel Autoregressive Distributed Lag (ARDL) model for a period of 23 years (1995-2018). Results reveal that financial development contributes to economic growth in both groups of countries in the long run. However, the contribution financial development makes to economic growth is more noticeable in the case of upper-middle income countries. Additionally, Granger causality test based on Vector Error Correction (VEC) showed two-way Granger causality between financial development and economic growth. Findings disclosed an inverted U-shaped association between financial development and income inequality for both lower-middle income and upper-middle income countries. This study can aid policymakers in designing policies that can strengthen financial systems, thereby enhancing economic growth and reducing income inequality. |
| first_indexed | 2024-04-13T23:38:13Z |
| format | Article |
| id | doaj.art-a92808df49cc4de79235449f200cdf08 |
| institution | Directory Open Access Journal |
| issn | 2166-5095 |
| language | English |
| last_indexed | 2024-04-13T23:38:13Z |
| publishDate | 2022-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Development Studies Research |
| spelling | doaj.art-a92808df49cc4de79235449f200cdf082022-12-22T02:24:38ZengTaylor & Francis GroupDevelopment Studies Research2166-50952022-12-019111712810.1080/21665095.2022.2065325The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countriesZaheer Abbas0Gul Afshan1Ghulam Mustifa2GIFT Business School, Faculty of Business & Commerce, GIFT University, Gujranwala, PakistanScholar in Economics at Gift Business School, Gift University, Gujranwala, PakistanScholar, Pakistan Institute of Development Economics, Islamabad, PakistanFinancial development and its relationships with economic growth and income inequality have recently received considerable attention. The present study investigates the relationships between financial development and (i) economic growth, using data from 44 countries; (ii) economic inequality, using data from 42 middle-income countries. Estimates are obtained through a panel Autoregressive Distributed Lag (ARDL) model for a period of 23 years (1995-2018). Results reveal that financial development contributes to economic growth in both groups of countries in the long run. However, the contribution financial development makes to economic growth is more noticeable in the case of upper-middle income countries. Additionally, Granger causality test based on Vector Error Correction (VEC) showed two-way Granger causality between financial development and economic growth. Findings disclosed an inverted U-shaped association between financial development and income inequality for both lower-middle income and upper-middle income countries. This study can aid policymakers in designing policies that can strengthen financial systems, thereby enhancing economic growth and reducing income inequality.https://www.tandfonline.com/doi/10.1080/21665095.2022.2065325Financial developmenteconomic growthincome distributionpanel datamiddle – income countries |
| spellingShingle | Zaheer Abbas Gul Afshan Ghulam Mustifa The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countries Development Studies Research Financial development economic growth income distribution panel data middle – income countries |
| title | The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countries |
| title_full | The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countries |
| title_fullStr | The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countries |
| title_full_unstemmed | The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countries |
| title_short | The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countries |
| title_sort | effect of financial development on economic growth and income distribution an empirical evidence from lower middle and upper middle income countries |
| topic | Financial development economic growth income distribution panel data middle – income countries |
| url | https://www.tandfonline.com/doi/10.1080/21665095.2022.2065325 |
| work_keys_str_mv | AT zaheerabbas theeffectoffinancialdevelopmentoneconomicgrowthandincomedistributionanempiricalevidencefromlowermiddleanduppermiddleincomecountries AT gulafshan theeffectoffinancialdevelopmentoneconomicgrowthandincomedistributionanempiricalevidencefromlowermiddleanduppermiddleincomecountries AT ghulammustifa theeffectoffinancialdevelopmentoneconomicgrowthandincomedistributionanempiricalevidencefromlowermiddleanduppermiddleincomecountries AT zaheerabbas effectoffinancialdevelopmentoneconomicgrowthandincomedistributionanempiricalevidencefromlowermiddleanduppermiddleincomecountries AT gulafshan effectoffinancialdevelopmentoneconomicgrowthandincomedistributionanempiricalevidencefromlowermiddleanduppermiddleincomecountries AT ghulammustifa effectoffinancialdevelopmentoneconomicgrowthandincomedistributionanempiricalevidencefromlowermiddleanduppermiddleincomecountries |