An empirical analysis of the relationship between financial deepening and economic growth: The case of Turkey


Thesis Type: Postgraduate

Institution Of The Thesis: Orta Doğu Teknik Üniversitesi, Faculty of Economic and Administrative Sciences, Department of Economics, Turkey

Approval Date: 2008

Student: ESEN KILIÇ

Supervisor: EBRU VOYVODA

Abstract:

This study aims to investigate the direction of the relationship between financial deepening and economic growth after the completion of financial liberalization in Turkey. In order to do this, an unbalanced panel data set of 49 OECD and emerging countries for 1953-2005 period is examined with Granger causality and panel data estimation techniques. In the light of panel data analysis results, quarterly Turkish time series data for 1987-2006 period is examined by using Granger causality, cointegration and Vector Error Correction Model (VECM) procedures. Although the unbalanced panel data analysis reveals a relationship that is from financial deepening to economic growth, country specific Granger causality analysis employed with the panel data gives the opposite relationship for Turkey. Moreover, it is observed that quarterly time series data analysis mainly gives a relationship that is from economic growth to financial deepening.