Financial deepening and economic growth in Mozambique

• Autor(a) principal: Emídio, Salvador Vítor de Jesus
• Data de Publicação: 2007
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/674
• topic: Economic Development; Economic Growth; Desenvolvimento Económico; Crescimento Económico

In this empirical research, based on Mozambican time series data, we examine the causality between financial deepening and economic growth, in a multivariate VAR structure over a period covering 24 years, from 1980 to 2003. Financial deepening is measured by the ratio of bank deposit liabilities to nominal GDP and is modeled with real per capita income as a proxy of economic development. Specifically, three analyses were undertaken. First, the time series properties of the variables were ascertained with the help of augmented Dickey-Fuller (ADF) unit root procedure. Second, the long run relationship between the variables was examined in the context of VAR and VECM framework, developed by Johansen and Juselius (1990). Finally, weak exogeneity test and Granger-causality tests were undertaken to determine the direction of causality between economic development and financial deepening. The results of the ADF tests indicate that all variable contain a unit root in their level but are stationary at their first differences. The cointegration test suggests that there is a long-run relationship between economic growth and financial deepening and weak exogeneity tests and Granger-causality tests indicate that economic development is causally dependent of financial deepening in Mozambique.