Banking sector development and economic growth in developing countries: a bootstrap panel Granger causality analysis

  • Khalil MhadhbiEmail author
  • Chokri Terzi
  • Ali Bouchrika


The purpose of this paper is to revisit the Granger causal relationship between banking sector development and economic growth for forty developing countries in the period 1970–2012. In order to capture the different aspects of banking sector development, we use two banking sector development indices and apply a panel bootstrap approach to Granger causality testing which takes into account cross-sectional dependence and heterogeneity issues. The empirical results show limited support for the supply-leading, demand-following and complementarity hypotheses, but provide evidence for a causal relationship between banking sector development and economic growth in twenty-five countries.


Economic growth Banking sector development Cross-sectional dependency Slope heterogeneity Granger causality bootstrap 

JEL Classification

O43 C22 C23 



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© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Higher Institute of ManagementUniversity of GabesGabèsTunisia

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