Financial Development, Savings and Investment in South Africa: A Dynamic Causality Test

Muyambiri, Brian; Odhiambo, Nicholas M.

doi:10.1515/gej-2017-0042

Cited by 5 publications

(6 citation statements)

References 19 publications

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“…Supporting the findings of Ndikumana, 2005, Nazlioglu et al , 2009, Demirhan, 2016, Sakyi et al , 2016, Muyambiri and Odhiambo, 2017 and 2018a, b, c, d present study finds long run relationship between financial development and Investment. The results indicate that in four specifications, F -statistics is greater than the upper critical bound at 1% significance level and in two specifications, F -statistics is greater than the upper critical bound at 5% significance level.…”

Section: Empirical Findingssupporting

confidence: 86%

“…As the results show that both bank-based and market-based financial development indicator affect the level of domestic investment in India. The findings are in consistence with Rousseau (1999), Xu (2000), Rousseau and Vuthipadadorn (2005), Asongu (2014), Muyambiri and Odhiambo (2017, 2018a, b, c, d), Babarinde et al (2020) and Iheonu et al (2020).…”

Section: Discussionsupporting

confidence: 62%

“…Muyambiri and Odhiambo (2016, 2017, 2018a, b, c, d) examine the impact of both bank-based and market-based financial development on investment in Botswana during 1976–2012, using the ARDL bound testing approach. The empirical result shows that while bank-based financial development has both a long-run and short-run positive impact on investment in Botswana, market-based financial development has no impact on investment.…”

Section: Financial Development and Investmentmentioning

confidence: 99%

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Does financial development matter for domestic investment? Empirical evidence from India

Sinha

Shastri

2021

SAJBS

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PurposeThis paper empirically examines the impact of financial development on domestic investment in India for the period 1989–2017.Design/methodology/approachThis study employs the autoregressive distributed lag (ARDL) bounds testing approach to co-integration to test the long-run relationship between financial development and domestic investment. To test the direction of causality, Toda–Yamamoto causality test and vector error correction model (VECM) Granger causality/Block Exogeneity Wald test have been employed. Investment has been measured by Gross Capital Formation. To capture various aspects of financial development in India, eight alternative indicators (both bank based and market based) have been used. With the help selected indicators, a composite index (FINDEX) of financial development has been constructed using principal component analysis (PCA).FindingsThe estimated result finds evidence in favour of positive, short-run and long-run impact of financial development on investment in the Indian economy. Both bank-based and market-based indicators are found to significantly affect the level of investment. The significant effect of efficiency-based financial development indicators (both bank based and market based) upon domestic investment implies that there is a need to implement policies that ensure the efficiency of financial intermediation.Originality/valueTo the best of authors' knowledge, not much research has been done to explore the relationship between financial development and domestic investment, especially in the case of Indian economy. This study also tries to find the impact of bank-based and market-based financial development indicators upon domestic investment to explore banks vs market issue.

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Section: Empirical Findingssupporting

confidence: 86%

Section: Discussionsupporting

confidence: 62%

Section: Financial Development and Investmentmentioning

confidence: 99%

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Does financial development matter for domestic investment? Empirical evidence from India

Sinha

Shastri

2021

SAJBS

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“…Nevertheless, from the limited empirical studies that have been performed, four main conclusions have materialised: i) Financial development Granger-causes investment (see, among others, Xu, 2000;Caporale, Howells, Soliman, 2005;Rousseau, Vuthipadadorn, 2005;Chaudry, 2007;Carp, 2012;Hamdi, Hakimi, Sbia, 2013;Asongu, 2014;Muyambiri, Odhiambo, 2016); ii) investment Granger-causes financial development (see Odhiambo, 2010;Muyambiri, Odhiambo, 2017a); iii) there is a bidirectional causality between financial development and investment (Shan, Morris, Sun, 2001;Shan, Jianhong, 2006;Lu et al, 2007;Nazlioglu et al, 2009;Huang, 2011;Muyambiri, Odhiambo, 2017b); and iv) no causal relationship exists between the two variables (Majid, 2008;Shan, Morris, 2002;Marques et al, 2013). Table 1 gives a summary of the previous studies, which have been conducted on the causal relationship between financial development and investment.…”

Section: Literature Reviewmentioning

confidence: 99%

Financial Development and Investment in Botswana: A Multivariate Causality Test

Muyambiri

Odhiambo

2018

Folia Oeconomica Stetinensia

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This paper examines the causal relationship between financial development and investment in Botswana between 1976 and 2014. The autoregressive distributed-lag (ARDL) bounds testing approach and a trivariate Granger-causality model are employed. In order to capture the breadth and depth of the financial sector in the study country, both bank- and market-based financial development indices are used. The results show that there is a bidirectional Granger-causal relationship between both bank-based and market-based financial development and investment in the short run. In the long run, a distinct causal flow is found to prevail only from investment to bank-based financial development. Given the findings, the causal relationship between financial development and investment is not a given as implied in economic literature. For Botswana, policies that enhance both investment and market-based financial development should be employed in the short run.

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“…In an empirical study, Mojekwu and Ogbulu (2017) concluded that financial development plays an important role in enhancing national savings. Likewise, Muyambiri and Odhiambo (2017) studied the causal nexus between national savings, investment and financial development through vector error correction mechanism (VECM) and concluded that causality runs from national savings to financial development.…”

Section: Literarture Reviewmentioning

confidence: 99%

The Causal Relationship between Financial Development, Financial Globalization and National Savings in Pakistan

Luqman,

Haq,

Ishtiaq

et al. 2023

CRISS

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Financial globalization has a role in transmitting information within financial markets and helps in financial development. Additionally, financial globalization facilitates risk diversification alleviates the negative consequences of economic recessions, enabling nations to engage in international borrowing and lending activities, thus stabilizing income, consumption, investment and savings levels. This research study analyzes the causal nexus between financial development, financial Globalization and national savings in Pakistan. Co-integration test indicates co-integration vector henceforth, there is relationship between variables in the long run. The causal relation is determined through vector error correction mechanism and it is found that there is long run bidirectional causality between financial development, financial globalization and national savings in Pakistan. This study recommends that monetary authorities in Pakistan to encourage financial inclusion as the ratio of account holders in financial sector is very low. This will encourage documented economy and savings will be channelized to productive sectors. Likewise, financial development up gradation with par with international standards will not only encourage domestic savings but also help in financial globalization.

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Financial Development, Savings and Investment in South Africa: A Dynamic Causality Test

Abstract: Abstract

Cited by 5 publications

References 19 publications

Does financial development matter for domestic investment? Empirical evidence from India

Does financial development matter for domestic investment? Empirical evidence from India

Financial Development and Investment in Botswana: A Multivariate Causality Test

The Causal Relationship between Financial Development, Financial Globalization and National Savings in Pakistan

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