<abstract xmlns="http://www.w3.org/1999/xhtml"><p>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.</p></abstract>

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.

Financial Development and Investment in Botswana: A Multivariate Causality Test

Folia Oeconomica Stetinensia

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Financial Development and Investment in Botswana: A Multivariate Causality Test"}

This paper examines the causal relationship between financial development and investment in Botswana between 1976 and 2014. The autoregressive distributed-lag...

Financial Development and Investment in Botswana: A Multivariate Causality Test

Publié en ligne: 31 déc. 2018

Pages: 72 - 89

Reçu: 20 mars 2018

Accepté: 31 oct. 2018

DOI: https://doi.org/10.2478/foli-2018-0020

Mots clés
financial development, investment, trivariate granger causality, Botswana

© 2018 Brian Muyambiri et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Financial Development and Investment in Botswana: A Multivariate Causality Test

Publié en ligne: 31 déc. 2018

Pages: 72 - 89

Reçu: 20 mars 2018

Accepté: 31 oct. 2018

DOI: https://doi.org/10.2478/foli-2018-0020

Mots clésfinancial development, investment, trivariate granger causality, Botswana

© 2018 Brian Muyambiri et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Mots clés
financial development, investment, trivariate granger causality, Botswana