The Association between Financial Innovation and Economic Growth in E7 Countrıes: A Panel Causality Analysis

Year 2021, , 493 - 511, 29.12.2021

Ayşe Ergin Ünal , Serkan Şahin

https://doi.org/10.47097/piar.1004999

Abstract

Financial innovations, as one of the factors affecting the development of the financial system, contribute to the enhancement of economic development by increasing the efficiency of investments, savings and competitive advantage. Therefore, taking into account the effects of financial innovations on economic growth may increase policy effectiveness. On the other hand, economic growth may also boost the rise of financial innovations by improving the efficiency of the financial system. In this context, it is vital to determine the association between financial innovation and economic growth in terms of determining the factors that increase economic growth and supporting policies that increase economic competitiveness. The purpose of this paper is to investigate the interaction between financial innovation and economic growth in E7 countries using panel causality analysis. Findings revealed that financial innovation causes economic growth in China and Turkey whereas, economic growth causes financial innovation in Russia, Mexico and Indonesia when different indicators are taken into consideration. In other words, it is possible to boost economic growth by encouraging financial innovations in quantity and quality. In Russia, Mexico and Indonesia, on the other hand, economic growth is an encouraging factor for the rise of financial innovations.

Keywords

Financial Innovation, Economic Growth, Panel Causality Analysis, E7 Countries.

E7 Ülkelerinde Finansal Yenilik ve Ekonomik Büyüme İlişkisi: Bir Panel Nedensellik Analizi

Abstract

Finansal sistemin gelişimini etkileyen unsurların başında gelen finansal yenilikler, yatırımların verimliliklerini, tasarrufları ve rekabet avantajını artırarak ekonomik gelişmişliğin artırılmasına katkı sağlamaktadır. Dolayısı ile ekonomik büyüme politikalarının geliştirilmesinde finansal yeniliklerin olası etkilerinin de dikkate alınması uygulanan politikaların etkinliğini artırabilmektedir. Diğer yandan, ekonomik büyüme de finansal sistemin etkinliğini artırarak finansal yeniliklerin ortaya çıkışını teşvik edebilmektedir. Bu kapsamda, finansal yenilik ile ekonomik büyüme arasındaki ilişkinin belirlenmesi, ekonomik büyümeyi artıran faktörlerin ortaya konulabilmesi ve ekonomik rekabet gücünü artırıcı politikaların desteklenebilmesi açısından önem taşımaktadır. Bu çalışmanın amacı E7 ülkelerinde finansal yenilik ve ekonomik büyüme arasındaki ilişkinin panel nedensellik analizleri kullanılarak incelenmesidir. Elde edilen bulgular farklı göstergeler dikkate alındığında Çin ve Türkiye’de finansal yeniliklerin ekonomik büyümenin nedeni olduğunu, Rusya, Meksika ve Endonezya’da ise ekonomik büyümenin finansal yeniliklerin nedeni olduğunu göstermiştir. Bir başka ifade ile Çin ve Türkiye’de finansal yeniliklerin teşvik edilmesi ve finansal yeniliklerin nicelik ve nitelik olarak geliştirilmesi yolu ile ekonomik büyümenin artırılması mümkün gözükmektedir. Rusya, Meksika ve Endonezya’da ise ekonomik büyümenin finansal yeniliklerin ortaya çıkmasında teşvik edici bir unsur olduğu söylenebilir.

Keywords

Finansal yenilik, Panel Nedensellik Analizleri, Ekonomik büyüme, E7 Ülkeleri.

References

• Abdouli, M. & Hammami, S. (2020). Economic growth, environment, FDI inflows, and financial development in middle east countries: fresh evidence from simultaneous equation models. Journal of Knowlege Economics, 11, 479-511.
• Acaravcı, S., Öztürk, İ. & Acaravcı, A. (2009). Financial development and economic growth: literature survey and empirical evidence from sub-saharan african countries, South African Journal of Economic and Management Sciences, 12(1), 11-27.
• Allen, D. S. & Ndikumana, L. (1998). Financial intermediation and economic growth in Southern Africa. Journal of African Economies, 9(2), 132-160.
• Amore, M.D., Schneider, C., & Žaldokas, A. (2013). Credit supply and corporate innovation. Journal of Financial Economics, 109, 835-855.
• Ansong, A. Marfo-Yiadom, E. & Ekow-Asmah, E. (2011). The effects of financial innovation on financial savings: evidence from an economy in transition. Journal of African Business, 12(1), 93-113.
• Arestis, P. & Demetriades, P. (1997). Financial development and economic growth: Assessing the evidence. The Economic Journal, 107(442), 783-799.
• Arrau, P. De Gregorio, J. Reinhart, C.M. & Wickham, P. (1995). The demand for money in developing countries: Assessing the role of financial innovation. Journal of Development Economics, 46(2), 317-340.
• Aslan, A. G. Ö. ve Küçükaksoy, İ. (2006). Finansal gelişme ve ekonomik büyüme ilişkisi: Türkiye ekonomisi üzerine ekonometrik bir uygulama. Ekonometri ve İstatistik E-Dergisi, (4), 25-38.
• Asteriou, D. & Spanos, K. (2019). The relationship between financial development and economic growth during the recent crisis: Evidence from the EU. Finance Research Letters, 28, 238-245. Baltagi, B. H. Feng, Q. & Kao, C. (2012). A Lagrange Multiplier test for cross-sectional dependence in a fixed effects panel data model. Journal of Econometrics, 170(1), 164-177.
• Bank for International Settlement-BIS. (1986). Recent innovations in international banking (Cross Report). Araştırma Raporu. URL: https://www.bis.org/publ/ecsc01.htm, (Erişim: 04.08.2020)
• Banxico. (2020). Economic information system (SIE). URL: https://www.banxico.org.mx/SieInternet/consultarDirectorioInternetAction.do?sector=3veaccion=consultarCuadroAnaliticoveidCuadro=CA452velocale=en (Erişim: 01.12.2020) Bara, A., Mugano, G., &Le Roux, P. (2016). Financial innovation and economic growth in the SADC. African Journal of Science, Technology, Innovation and Development, 8(5-6), 483-495.
• Beck, T. Chen, T., Lin, C., & Song, F.M. (2016). Financial innovation: The bright and the dark sides, Journal of Banking ve Finance, 72, 28-51.
• Bernier, M., & Plouffe, M. (2019). Financial innovation, economic growth, and the consequences of macroprudential policies. Research in Economics, 73, 162–173.
• Bertay, A.C. Gong, D. & Wagner, W. (2017). Securitization and economic activity: The credit composition channel. Journal of Financial Stability, 28, 225-239.
• Breusch, T.S. & Pagan, A.R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. The Review of Economic Studies, 47(1), 239-253.
• Büyükakın, F. Cengiz, V. ve Pehlivanoğlu, F. (2011). Türkiye’de finansal yenilik-tüketim harcamaları ilişkisi (Ampirik Analiz: 1998-2008). Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 10. Ekonometri ve İstatistik Sempozyumu Özel Sayısı, 207-222.
• Calderón, V. & Liu, L. (2003). The direction of causality between financial development and economic growth. Journal of Development Economics, 72(1), 321-334.
• Chou, Y. K. (2007). Modeling financial innovation and economic growth: Why the financial sector matters to the real economy. The Journal of Economic Education, 38(1), 78-90.
• Cömert, H. & Epstein, G. (2016). Finansal yenilik yazınındaki son gelişmeler (No. 1604). STPS-Science and Technology Policy Studies Center, Middle East Technical University. URL: https://stps.metu.edu.tr/en/system/files/stps_wp_1604.pdf, (Erişim: 08.04.2021)
• Demetriades, P.O. & Hussein, K.A. (1996). Does financial development cause economic growth? Time-series evidence from 16 countries. Journal of Development Economics, 51(2), 387-411.
• Durusu-Ciftci, D. Ispir, M.S. & Yetkiner, H. (2017). Financial development and economic growth: Some theory and more evidence. Journal of Policy Modeling, 39(2), 290-306.
• FRED-Federal Reserve Bank of St. Louis. (2020). Federal Reserve Economic Data. URL: https://fred.stlouisfed.org/, (Erişim: 08.04.2020).
• Fetai, B. T. (2018). Does financial development accelerate economic growth? An empirical analysis of European countries in transition. Journal of Financial Economic Policy, 10(3), 426-435.
• Frame, W. S. & White, L.J. (2014) Technological Change, Financial Innovation, and Diffusion in Banking NYU Working Paper No. 2451/33549. URL: https://ssrn.com/abstract=2380060, (Erişim: 08.04.2020). Gregorio, J. & Guidotti, P.E. (1995). Financial development and economic growth. World Development, 2(3), 433-448. Hao, J. & Hunter, W.C. (1997). A Test of the impact of financial innovation on economic growth. Managerial Finance, 23(11), 64-78.
• Hassan, M.K., Sanchez, B. & Yu, J.S. (2011). Financial development and economic growth: New evidence from panel data. The Quarterly Review of Economics and Finance, 51(1), 88-104.
• Hermes, N. & Lensink, R. (2003). Foreign direct investment, financial development and economic growth. The Journal of Development Studies, 40(1), 142-163.
• Jenkinson, N. Penalver, A. & Vause, N. (2008). Financial innovation: what have we learnt?. Bank of England Quarterly Bulletin, Çalışma Metni. URL: https://www.bankofengland.co.uk/speech/2008/financial-innovation-what-have-we-learnt, (Erişim: 08.04.2020).
• Johnson, S. & Kwak, J. (2012). Is financial innovation good for the economy?. Innovation Policy and the Economy, 12(1), 1-16. Jung, W.S. (1986). Financial development and economic growth: international evidence. Economic Development and Cultural Change, 34(2), 333-346.
• Idun, A.A. & Aboagye, Q.Q. (2014), Bank competition, financial innovations and economic growth in Ghana. African Journal of Economic and Management Studies, 5(1), 30-51.
• Kandır, S.Y. İskenderoğlu, Ö. & Önal, Y.B. (2007). Finansal gelişme ve ekonomik büyüme arasındaki ilişkinin araştırılması. Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 16(2), 311-326.
• Kaplan, C. (1999). Finansal yenilikler ve piyasalar üzerine etkileri: Türkiye örneği. TCMB Araştırma Genel Müdürlüğü Tartışma Tebliği No: 9910. URL: https://core.ac.uk/download/pdf/7061383.pdf, (Erişim: 12.07.2020).
• Khan, M.S. & Senhadji, A.S. (2000). International Monetary Fund, Çalışma Metni, 209. URL: https://www.elibrary.imf.org/view/journals/001/2000/209/article-A001-en.xml, (Erişim: 08.04.2020).
• Kónya, L. (2006). Exports and growth: Granger Causality Analysis on OECD countries with a Panel Data Approach. Economic Modeling, 23(6), 978-992.
• Laeven, L. Levine, R. & Michalopoulos, S. (2015). Financial innovation and endogenous growth. Journal of Financial Intermediation, 24(1), 1-24.
• Laumas, P. (1962). Schumpeter's Theory of Economic Development and Underdeveloped Countries. The Quarterly Journal of Economics, 76(4), 653-659.
• Levine, R. (2005). Finance and growth: Theory and evidence, in P. Aghion and S. Durlauf, eds.: Handbook of Economic Growth (North‐Holland Elsevier Publishers, Amsterdam).URL:http://faculty.haas.berkeley.edu/ross_levine/papers/forth_book_durlauf_finngrowth.pdf, (Erişim: 08.04.2020). Merton, R. C. (1992). Financial innovation and economic performance. Journal of Applied Corporate Finance, 4( 4), 12-22.
• Merton, R.C. (1995). Financial innovation and the management and regulation of financial institutions. Journal of Banking ve Finance,19, 461-481.
• Miller, M. H. (1986). Financial innovation: The last twenty years and the next. Journal of Financial and Quantitative Analysis, 459-471.
• Mishra, P.K. (2009). Financial innovation and economic growth - A theoretical approach. The Research Network. 4. 59-64. 10.2139/ssrn.1262658.
• Nazir, M. R., Tan, Y., & Nazir, M. I. (2018). Financial Innovation and Economic Growth: Empirical Evidence from China, India and Pakistan. International Journal of Finance and Economics, forthcoming. URL: SSRN: https://ssrn.com/abstract=3166798 or http://dx.doi.org/10.2139/ssrn.3166798, (Erişim: 08.04.2020).
• Okafor, I. G. Chijindu, E. H. & Chikezie, A.K. (2017). Does financial innovation drive growth? Empirical analysis of the Nigerian case. British Journal of Economics, Management ve Trade, 16(3), 1-10.
• Öncü, M. A. Mesci, M. ve Şahin, Ö. (2012). Finansal yeniliklerin işletme performansına etkisi: İstanbul'daki turizm işletmelerine yönelik bir araştırma. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 26(3-4), 125-141.
• Öncü, M. A. Mesci, M. Şahin, Ö. ve Faikoğlu, S. (2013). Finansal yeniliklerin işletme performansına etkisi: İstanbul'daki hizmet işletmelerine yönelik bir araştırma. Alanya İşletme Fakültesi Dergisi, 5(3), 119-129.
• Öztürk, İ. (2008). Financial development and economic growth: empirical evidence from Turkey, Applied Econometrics and International Development, 8(1), 85-98.
• Öztürk, İ. & Acaravcı, A. (2013). The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey. Energy Economics, 36, 262-267.
• Pesaran, M.H. (2004). General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics No: 0435, Faculty of Economics, University of Cambridge.
• Pradhan, R. P. Arvin, M. B. Hall, J. H. & Nair, M. (2016). Innovation, financial development and economic growth in Eurozone countries. Applied Economics Letters, 23(16), 1141-1144.
• Qamruzzaman, M. & Wei, J. (2018). Financial innovation, stock market development, and economic growth: An application of ARDL Model, International Journal of Financial Studies, 6(3), 1-30.
• Ram, R. (1999). Financial development and economic growth: Additional evidence, The Journal of Development Studies, 35(4), 164-174.
• Sbia, R., Shahbaz, M. & Öztürk, İ. (2017). Economic growth, financial development, urbanisation and electricity consumption nexus in UAE. Economic Research, 30(1), 527-549.
• Schumpeter J. (1934). Theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. Harvard University Press, Cambridge, MA.
• Silber, W. L. (1983). The process of financial innovation. The American Economic Review, 73(2), 89-95.
• Shiller, R. J. (2004). Radical financial innovation. Cowles Foundation Discussion Paper No. 1461. Çalışma Metni. URL: https://ssrn.com/abstract=537402, (Erişim: 08.04.2020).
• Shiller, R. J. (2013) Capitalism and financial innovation. Financial Analysts Journal, 69(1), 21-25.
• Škare, M. Sinković, D. & Porada-Rochoń, M. (2019). Financial development and economic growth in Poland 1990–2018. Technological and Economic Development of Economy, 25(2), 103-133.
• Soltani, H. Triki, M. B. Ghandri, M. & Abderzag, F. T. (2021). Does geopolitical risk and financial development matter for economic growth in MENA countries?. Journal of International Studies, 14(1), 103-116.
• Thanawala, K. (1994). Schumpeter's theory of economic development and development economics. Review of Social Economy, 52(4), 353-363.
• Tufano, P. (2002). Financial innovation. The Handbook of the Economics of Finance (North Holland), George Constantinides (Ed.). URL: http://www.dklevine.com/archive/fininnov_tufano_june2002.pdf (Erişim: 08.04.2020).
• Valverde, C.S. Del Paso, R.L. & Fernández, F. R. (2007). Financial innovations in Banking: Impact on regional growth. Regional Studies, 41(3), 311-326.
• World Development Indicators (2020). Databank. URL: https://databank.worldbank.org/source/world-development-indicators, (Erişim: 08.04.2020).
• Wu, C.F. Huang, S.C. Chang, T. Chiou, C.C. Hsueh, H.P. (2020). The nexus of financial development and economic growth across major Asian economies: Evidence from bootstrap ARDL testing and machine learning approach, Journal of Computational and Applied Mathematics, 372,1-14.
• Yetiz, F. ve Ünal, A. E. (2018). Finansal yeniliklerin gelişimi ve Türk bankacılık sektörüne etkileri. Kastamonu University Journal of Economics ve Administrative Sciences, 20(4), 117-135.
• Zhang, J. Wang, L. & Wang, S. (2012). Financial development and economic growth: Recent evidence from China. Journal of Comparative Economics, 40(3), 393-412.