Authors retain the copyright without restrictions for their published content in this journal. HSSR is a SHERPA ROMEO Green Journal.
Publishing License
This is an open-access article distributed under the terms of
IMPACT OF FINANCIAL GROWTH ON THE ECONOMIC DEVELOPMENT OF OMAN
Corresponding Author(s) : Md. Shabbir Alam
Humanities & Social Sciences Reviews,
Vol. 8 No. 4 (2020): July
Abstract
Purpose of the study: This paper aims to empirically test the long and short-run effects of financial development on the economic growth of Oman.
Methodology: This paper has applied the Unit root test, ARDL Bound Test for Cointegration, CUSUM, and CUSUMSQ Test for testing of hypotheses. The data used to test the relationship between financial development and economic growth covers the period from 1980 to 2017.
Main Findings: The major finding of the study suggested that the financial development variables measured in the research influence the economic growth in Oman.
Applications of the Study: This study can be useful to assess the strength of the empirical link between the financial sector and economic growth in Oman as one of the oil-exporting states of the Middle East Region, where such studies are inadequate.
The novelty of the Study: The finding of the study with an addition to the existing literature by incorporating the new variables like employment or poverty in the existing model provides new insight on the financial development of Oman.
Limitations and forward of the Study: The study has considered a set of data which in general acts as a catalyst for economic development in a particular country.
Implications of the Study: The outcome of the study suits the nature of the country and its socio-economic conditions. The outcomes of the study will not be suitable for every country and may result in spurious outcomes.
Keywords
Download Citation
Endnote/Zotero/Mendeley (RIS)BibTeX
- Adu, G., Marbuah, G., & Mensah, J. T. (2013). Financial development and economic growth in Ghana: Does the measure of financial development matter? Review of Development Finance, 3(4), 192-203. https://doi.org/10.1016/j.rdf.2013.11.001 DOI: https://doi.org/10.1016/j.rdf.2013.11.001
- Ali, S.A.S., (2013). Financial Intermediation and Economic Growth in Sudan: An Empirical Investigationâ€. 1970–2011. British Journal of Economics, Management & Trade. 3(4), 332-358. https://doi.org/10.9734/BJEMT/2013/3387 DOI: https://doi.org/10.9734/BJEMT/2013/3387
- Arfanuzzaman, M., (2014). The Long-Run Dynamic Relationship between Broad Money Supply and the GDP of Bangladesh: A VECM Approach. Developing Country Studies, 4(14), 167-179
- Aric, K.H., (2014). The Effect of Financial Development on Economic Growth in the European Union: A Panel Data Analysis. International Journal of Economic Practices, 4(4), 466-471.
- Asfaw, H.A., (2014). Trade policy and economic growth in SubSaharan Africa: A panel data approach. American Journal of Trade and Policy, 1, 94–101. https://doi.org/10.18034/ajtp.v1i3.370 DOI: https://doi.org/10.18034/ajtp.v1i3.370
- Bist, J.P., (2018). Financial development and economic growth: Evidence from a panel of 16 African and non-African low-income countries. Cogent Economics & Finance, 6(1), 1449780. https://doi.org/10.1080/23322039.2018.1449780 DOI: https://doi.org/10.1080/23322039.2018.1449780
- Beck, T., (2003). Financial development and International Trade is there a link?, Journal of International Economics, 57(1), 107-131. https://doi.org/10.1016/S0022-1996(01)00131-3 DOI: https://doi.org/10.1016/S0022-1996(01)00131-3
- Brueckner, M., & Lederman, D., (2015). Trade openness and economic growth: Panel data evidence from Sub-Saharan Africa. Economica, 82, 1302- 1323. https://doi.org/10.1111/ecca.12160 DOI: https://doi.org/10.1111/ecca.12160
- CBO, Annual Report-(2018). Central Bank of Oman Annual Report, cbo.gov.om/report/AnnualReport/89
- The economy of Oman- https://fanack.com/oman/economy/
- Chaitip, P., Chokethaworn, K., Chaiboonsri, C., & Khounkhalax, M. (2015). Money supply influencing on economic growth-wide phenomena of AEC open region. Procedia Economics and Finance, 24, 108-115. https://doi.org/10.1016/S2212-5671(15)00626-7 DOI: https://doi.org/10.1016/S2212-5671(15)00626-7
- Estrada. G., Park, D., Ramayandi, A., (2010). Financial Development and Economic Growth in Developing Asia. ADB Economics Working Paper Series, No. 233, Asian Development Bank. https://doi.org/10.2139/ssrn.1751833 DOI: https://doi.org/10.2139/ssrn.1751833
- Galil, A., and Ying, M. (2008). Financial Development and Economic Growth: Time Series Evidence from Pakistan and China. Journal of Economic Cooperation, 29(2), 29-68.
- Ibid…
- Haque, M.I., (2020). The Growth of Private Sector and Financial Development in Saudi Arabia. Economies, 8(2), 1-15. https://doi.org/10.3390/economies8020039 DOI: https://doi.org/10.3390/economies8020039
- Iheanacho, E., (2016). The Impact of Financial Development on Economic Growth in Nigeria: An ARDL Analysis. Journal of Economies, 4(4), 1-12. https://doi.org/10.3390/economies4040026 DOI: https://doi.org/10.3390/economies4040026
- Ibrahim, M.A., (2013). Financial Development and Economic Growth in Saudi Arabian Economy. Applied Econometrics and International Development, Euro-American Association of Economic Development, 13(1), 133-144.
- Ibrahim, M., & Alagidede, P. (2017). Financial development, growth volatility and information asymmetry in sub-Saharan Africa: Does law matter? South African Journal of Economics, 85(4), 570-588. https://doi.org/10.1111/saje.12176 DOI: https://doi.org/10.1111/saje.12176
- Ibid…
- Kunt, A.D., and Levine, R., (2001). Financial Structure and Economic Growth. The MIT Press, Cambridge, MA.
- Kletzer, K., Bardhan, P., (1987). Credit Markets and Patterns of International Trade. Journal of Development Economics, 27(1-2), 57-70. https://doi.org/10.1016/0304-3878(87)90006-X DOI: https://doi.org/10.1016/0304-3878(87)90006-X
- Malkawi, H.M., Marashdeh, H.A., Abdullah, N., (2012). Financial Development and Economic Growth in UAE: Empirical Assessment Using ARDL Approach to Co-integration. International Journal of Economic and Finance, 4(5), 105-115. https://doi.org/10.5539/ijef.v4n5p105 DOI: https://doi.org/10.5539/ijef.v4n5p105
- McKinnon, R.I., (1973). Money and capital in economic development. Brookings Institution, 177, Washington D.C.
- Melina D., Chaido, D., Antonios, A., (2004). A Causal Relationship between Trade, Foreign Direct Investment and Economic Growth for Greece. American Journal of Applied Sciences, 1(3), 230-235. https://doi.org/10.3844/ajassp.2004.230.235 DOI: https://doi.org/10.3844/ajassp.2004.230.235
- Michiel, B., Clemens, K., Marielle, N., (2017). The effect of financial development on economic growth: a meta-analysis. CPB Netherlands Bureau for Economic Policy Analysis, CPB Discussion Paper, 340.
- Sufyan, E.M., (2007). Finance-Growth Nexus in Sudan: Empirical Assessment Based on An Application of The Autoregressive Distributed Lag (ARDL) Model. API-Working Paper Series 0803, Arab Planning Institute - Kuwait, Information Center.
- Ibid…
- Nasir, N.M., Ali, N., (2014). Economic Growth, Financial Depth and Savings Nexus in Saudi Arabia: An Empirical Investigation. Journal of Applied Finance & Banking, 4(3), 151-165.
- Nejad, M.Z., Fatimah, H. & Seyed A. A., (2014). Trade-Growth Nexus in Developing and Developed Countries: An Application of Extreme Bounds Analysis. Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(7), 915-929.
- Oluitan, R.O., (2012). Financial Development and Economic Growth in Africa: Lessons and Prospects. Business and Economic Review, 2(2), 54-67. https://doi.org/10.5296/ber.v2i2.2205 DOI: https://doi.org/10.5296/ber.v2i2.2205
- Oman-Market Overview (2018).Oman-Market Overview Retrieved from Export.gov. Nov. 20. https://www.export.gov/article?series=a0pt0000000PAucAAG&type=Country_Commercial__kav
- Ozturk, I., (2008). Financial development and economic growth: evidence from Turkey. Applied Econometrics and International Development, 8(1), 85-98.
- Pesaran, M.H., and Shin, Y., (1999). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. In: Strom, S., Ed., Ch., 11, Econometrics and Economic Theory in the 20th Century the Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge, 371-413. https://doi.org/10.1017/CCOL521633230.011 DOI: https://doi.org/10.1017/CCOL521633230.011
- Pesaran, M. H., Shin, Y., Smith, R.J., (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616 DOI: https://doi.org/10.1002/jae.616
- Prochniak, M., Wasiak, K. (2016). The impact of the financial system on economic growth in the context of the global crisis: empirical evidence for the EU and OECD countries. Empirica, 44, 295–337. https://doi.org/10.1007/s10663-016-9323-9 DOI: https://doi.org/10.1007/s10663-016-9323-9
- Reuttner, I., Glass, T, Duffie, D., Horen. N., (2012). Financial Development Report. World Economic Forum, USA Inc.
- Saber, A.S.A., (2013). Financial Intermediation and Economic Growth in Sudan: An Empirical Investigation- 1970–2011. British Journal of Economics, Management & Trade, 3(4), 332-358. https://doi.org/10.9734/BJEMT/2013/3387 DOI: https://doi.org/10.9734/BJEMT/2013/3387
- Svaleryd, H., Vlachos, J. (2002). Markets for risk and openness to trade: How are they related?. Journal of International Economics, 57(2), 369–395. https://doi.org/10.1016/S0022-1996(01)00153-2 DOI: https://doi.org/10.1016/S0022-1996(01)00153-2
- Umar, G., Abdulhakeem, K.A., (2010). Oil Price Shocks and the Nigeria Economy: A Variance Autoregressive (VAR) Model. International Journal of Business and Management, 5(8), 39-49. ttps://doi.org/10.5539/ijbm.v5n8p39 DOI: https://doi.org/10.5539/ijbm.v5n8p39
- Yang, F., (2019). The impact of financial development on economic growth in middle-income countries. Journal of International Financial Markets, Institutions and Money, 59(C), 74-89. https://doi.org/10.1016/j.intfin.2018.11.008 DOI: https://doi.org/10.1016/j.intfin.2018.11.008
References
Adu, G., Marbuah, G., & Mensah, J. T. (2013). Financial development and economic growth in Ghana: Does the measure of financial development matter? Review of Development Finance, 3(4), 192-203. https://doi.org/10.1016/j.rdf.2013.11.001 DOI: https://doi.org/10.1016/j.rdf.2013.11.001
Ali, S.A.S., (2013). Financial Intermediation and Economic Growth in Sudan: An Empirical Investigationâ€. 1970–2011. British Journal of Economics, Management & Trade. 3(4), 332-358. https://doi.org/10.9734/BJEMT/2013/3387 DOI: https://doi.org/10.9734/BJEMT/2013/3387
Arfanuzzaman, M., (2014). The Long-Run Dynamic Relationship between Broad Money Supply and the GDP of Bangladesh: A VECM Approach. Developing Country Studies, 4(14), 167-179
Aric, K.H., (2014). The Effect of Financial Development on Economic Growth in the European Union: A Panel Data Analysis. International Journal of Economic Practices, 4(4), 466-471.
Asfaw, H.A., (2014). Trade policy and economic growth in SubSaharan Africa: A panel data approach. American Journal of Trade and Policy, 1, 94–101. https://doi.org/10.18034/ajtp.v1i3.370 DOI: https://doi.org/10.18034/ajtp.v1i3.370
Bist, J.P., (2018). Financial development and economic growth: Evidence from a panel of 16 African and non-African low-income countries. Cogent Economics & Finance, 6(1), 1449780. https://doi.org/10.1080/23322039.2018.1449780 DOI: https://doi.org/10.1080/23322039.2018.1449780
Beck, T., (2003). Financial development and International Trade is there a link?, Journal of International Economics, 57(1), 107-131. https://doi.org/10.1016/S0022-1996(01)00131-3 DOI: https://doi.org/10.1016/S0022-1996(01)00131-3
Brueckner, M., & Lederman, D., (2015). Trade openness and economic growth: Panel data evidence from Sub-Saharan Africa. Economica, 82, 1302- 1323. https://doi.org/10.1111/ecca.12160 DOI: https://doi.org/10.1111/ecca.12160
CBO, Annual Report-(2018). Central Bank of Oman Annual Report, cbo.gov.om/report/AnnualReport/89
The economy of Oman- https://fanack.com/oman/economy/
Chaitip, P., Chokethaworn, K., Chaiboonsri, C., & Khounkhalax, M. (2015). Money supply influencing on economic growth-wide phenomena of AEC open region. Procedia Economics and Finance, 24, 108-115. https://doi.org/10.1016/S2212-5671(15)00626-7 DOI: https://doi.org/10.1016/S2212-5671(15)00626-7
Estrada. G., Park, D., Ramayandi, A., (2010). Financial Development and Economic Growth in Developing Asia. ADB Economics Working Paper Series, No. 233, Asian Development Bank. https://doi.org/10.2139/ssrn.1751833 DOI: https://doi.org/10.2139/ssrn.1751833
Galil, A., and Ying, M. (2008). Financial Development and Economic Growth: Time Series Evidence from Pakistan and China. Journal of Economic Cooperation, 29(2), 29-68.
Ibid…
Haque, M.I., (2020). The Growth of Private Sector and Financial Development in Saudi Arabia. Economies, 8(2), 1-15. https://doi.org/10.3390/economies8020039 DOI: https://doi.org/10.3390/economies8020039
Iheanacho, E., (2016). The Impact of Financial Development on Economic Growth in Nigeria: An ARDL Analysis. Journal of Economies, 4(4), 1-12. https://doi.org/10.3390/economies4040026 DOI: https://doi.org/10.3390/economies4040026
Ibrahim, M.A., (2013). Financial Development and Economic Growth in Saudi Arabian Economy. Applied Econometrics and International Development, Euro-American Association of Economic Development, 13(1), 133-144.
Ibrahim, M., & Alagidede, P. (2017). Financial development, growth volatility and information asymmetry in sub-Saharan Africa: Does law matter? South African Journal of Economics, 85(4), 570-588. https://doi.org/10.1111/saje.12176 DOI: https://doi.org/10.1111/saje.12176
Ibid…
Kunt, A.D., and Levine, R., (2001). Financial Structure and Economic Growth. The MIT Press, Cambridge, MA.
Kletzer, K., Bardhan, P., (1987). Credit Markets and Patterns of International Trade. Journal of Development Economics, 27(1-2), 57-70. https://doi.org/10.1016/0304-3878(87)90006-X DOI: https://doi.org/10.1016/0304-3878(87)90006-X
Malkawi, H.M., Marashdeh, H.A., Abdullah, N., (2012). Financial Development and Economic Growth in UAE: Empirical Assessment Using ARDL Approach to Co-integration. International Journal of Economic and Finance, 4(5), 105-115. https://doi.org/10.5539/ijef.v4n5p105 DOI: https://doi.org/10.5539/ijef.v4n5p105
McKinnon, R.I., (1973). Money and capital in economic development. Brookings Institution, 177, Washington D.C.
Melina D., Chaido, D., Antonios, A., (2004). A Causal Relationship between Trade, Foreign Direct Investment and Economic Growth for Greece. American Journal of Applied Sciences, 1(3), 230-235. https://doi.org/10.3844/ajassp.2004.230.235 DOI: https://doi.org/10.3844/ajassp.2004.230.235
Michiel, B., Clemens, K., Marielle, N., (2017). The effect of financial development on economic growth: a meta-analysis. CPB Netherlands Bureau for Economic Policy Analysis, CPB Discussion Paper, 340.
Sufyan, E.M., (2007). Finance-Growth Nexus in Sudan: Empirical Assessment Based on An Application of The Autoregressive Distributed Lag (ARDL) Model. API-Working Paper Series 0803, Arab Planning Institute - Kuwait, Information Center.
Ibid…
Nasir, N.M., Ali, N., (2014). Economic Growth, Financial Depth and Savings Nexus in Saudi Arabia: An Empirical Investigation. Journal of Applied Finance & Banking, 4(3), 151-165.
Nejad, M.Z., Fatimah, H. & Seyed A. A., (2014). Trade-Growth Nexus in Developing and Developed Countries: An Application of Extreme Bounds Analysis. Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(7), 915-929.
Oluitan, R.O., (2012). Financial Development and Economic Growth in Africa: Lessons and Prospects. Business and Economic Review, 2(2), 54-67. https://doi.org/10.5296/ber.v2i2.2205 DOI: https://doi.org/10.5296/ber.v2i2.2205
Oman-Market Overview (2018).Oman-Market Overview Retrieved from Export.gov. Nov. 20. https://www.export.gov/article?series=a0pt0000000PAucAAG&type=Country_Commercial__kav
Ozturk, I., (2008). Financial development and economic growth: evidence from Turkey. Applied Econometrics and International Development, 8(1), 85-98.
Pesaran, M.H., and Shin, Y., (1999). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. In: Strom, S., Ed., Ch., 11, Econometrics and Economic Theory in the 20th Century the Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge, 371-413. https://doi.org/10.1017/CCOL521633230.011 DOI: https://doi.org/10.1017/CCOL521633230.011
Pesaran, M. H., Shin, Y., Smith, R.J., (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616 DOI: https://doi.org/10.1002/jae.616
Prochniak, M., Wasiak, K. (2016). The impact of the financial system on economic growth in the context of the global crisis: empirical evidence for the EU and OECD countries. Empirica, 44, 295–337. https://doi.org/10.1007/s10663-016-9323-9 DOI: https://doi.org/10.1007/s10663-016-9323-9
Reuttner, I., Glass, T, Duffie, D., Horen. N., (2012). Financial Development Report. World Economic Forum, USA Inc.
Saber, A.S.A., (2013). Financial Intermediation and Economic Growth in Sudan: An Empirical Investigation- 1970–2011. British Journal of Economics, Management & Trade, 3(4), 332-358. https://doi.org/10.9734/BJEMT/2013/3387 DOI: https://doi.org/10.9734/BJEMT/2013/3387
Svaleryd, H., Vlachos, J. (2002). Markets for risk and openness to trade: How are they related?. Journal of International Economics, 57(2), 369–395. https://doi.org/10.1016/S0022-1996(01)00153-2 DOI: https://doi.org/10.1016/S0022-1996(01)00153-2
Umar, G., Abdulhakeem, K.A., (2010). Oil Price Shocks and the Nigeria Economy: A Variance Autoregressive (VAR) Model. International Journal of Business and Management, 5(8), 39-49. ttps://doi.org/10.5539/ijbm.v5n8p39 DOI: https://doi.org/10.5539/ijbm.v5n8p39
Yang, F., (2019). The impact of financial development on economic growth in middle-income countries. Journal of International Financial Markets, Institutions and Money, 59(C), 74-89. https://doi.org/10.1016/j.intfin.2018.11.008 DOI: https://doi.org/10.1016/j.intfin.2018.11.008