Impact of Economic Growth and Capital on Financial Development: Analysis of the Role of Financial Globalization in the Case of Turkey with ARDL Bounds Test Approach


Creative Commons License

Altay Topcu B., Sümerli Sarıgül S.

International Journal of Business & Economic Studies, vol.4, no.1, pp.53-64, 2022 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Volume: 4 Issue: 1
  • Publication Date: 2022
  • Doi Number: 10.54821/uiecd.1115243
  • Journal Name: International Journal of Business & Economic Studies
  • Journal Indexes: Index Copernicus
  • Page Numbers: pp.53-64

Abstract

The aim of this study is to examine the impact of economic growth, capital and financial globalization on financial development for the period 1990-2018 in the case of Turkey. In the analysis, credits to the private sector were used as an indicator of financial development. The measure of globalization is based on the KOF financial globalization index. The long-run relationship between the series was revealed with the ARDL Bounds Test approach and a long-run prediction was made. As a result of the analysis, the effect of all variables on financial development was found to be positive and statistically significant. Long-run estimating was also made with FMOLS, DOLS and CCR models to demonstrate the reliability of the ARDL model. In all models, it was found that the estimation results were consistent with each other. In the latest Toda Yamamoto causality analysis, the bidirectional causality relationship between financial development and GDP and capital was identified. A unidirectional causality relationship from financial globalization to financial development has been found. Therefore, it has been concluded that financial globalization is an important factor in the growth and development process of the financial system in Turkey.