Open AccessThe Causal Link between Financial Sector and Economic Development: The Case of Kazakhstan
Author(s) -
Maya Katenova,
William Gissy,
Zhanat Syzdykov
Publication year - 2017
Publication title -
international journal of business administration
Language(s) - English
Resource type - Journals
eISSN - 1923-4015
pISSN - 1923-4007
DOI - 10.5430/ijba.v8n2p40
Subject(s) - gross domestic product , economics , causality (physics) , panel data , stock market , index (typography) , proxy (statistics) , monetary economics , financial sector , point (geometry) , value (mathematics) , financial system , finance , macroeconomics , econometrics , geography , context (archaeology) , physics , geometry , mathematics , archaeology , quantum mechanics , machine learning , world wide web , computer science
This study empirically explores the causal relationship between financial depth and economic growth in Kazakhstan. The specific objective of this study is to investigate whether the causality direction between financial depth and economic growth in Kazakhstan does in fact apply. With this aim, the data from 20 banks operating between 2006 and 2015 was used. This data was obtained from the National Bank of Kazakhstan Statistical Bulletin. Quarterly observations are collected in aggregate form during 1Q 2006 – 4Q 2015 for GDP in level and stock market index value, and individual observations from the 20 largest banks during 1Q 2006 – 4Q 2015 for total lending volume in level in percent point, and total deposit volume in level. These quarterly data are employed in the panel study framework. The results of the study show that banks’ lending significantly strongly affects economic growth in Kazakhstan. At the same time, GDP also significantly strongly affects banks’ lending. Therefore, there is mutual causality between banks’ lending and the economy (Gross Domestic Product) in Kazakhstan. Both the economy and the financial sector do affect each other positively and significantly.