Do non-intermediation services tell us more in the finance–growth nexus?: causality evidence from eight OECD countries. Issue 7 (7th February 2020)

• Record Type: Journal Article
• Authors: Cheng, Su-Yin; Hou, Han
• Is Part Of: Applied economics. Volume 52:Issue 7(2020)
• Page Start: 756
• Page End: 768
• Publication Date: 2020-02-07
• Subjects: Financial intermediation -- non-intermediation -- economic growth -- Granger causality; C32 -- F30 -- G21 -- G28 -- O16 -- O40; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2019.1659928
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: This paper provides new evidence on a traditional finance–growth nexus through dividing financial services into financial intermediation and non-intermediation services and examining their relationships with economic growth. Applying time-series cointegration techniques and Granger causality tests for eight Organization for Economic Cooperation and Development (OECD) countries, reveals several results. First, there is a long-run equilibrium relationship among economic growth, intermediation activities, and non-intermediation activities in Austria, France, and Korea. Second, non-intermediation services impede long-run economic growth in Austria and France, whereas non-intermediation business and financial intermediation services accelerate Korea's long-term growth. Third, weak exogeneity tests support long-run bi-directional causality and the supply-leading hypothesis in terms of the relationship between financial services and economic growth. Finally, the influences of intermediation and non-intermediation activities on economic growth vary across countries, financial services, and time periods, indicating that countries should adopt different financial services to enhance long- or short-term economic growth. This paper emphasizes the importance of non-intermediation activities in the growth process and in the development of intermediation services.