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Toda and Yamamoto Causality Tests between "Bank-Based" Financial Deepening and Economic Growth in Nigeria

Toda and Yamamoto Causality Tests between "Bank-Based" Financial Deepening and Economic Growth in Nigeria,Cletus C. Agu,Jude Okechukwu Chukwu

Toda and Yamamoto Causality Tests between "Bank-Based" Financial Deepening and Economic Growth in Nigeria   (Citations: 1)
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This study employed the augmented Granger causality test approach developed by Toda and Yamamoto (1995) to ascertain the direction of causality between "bank-based" financial deepening variables and economic growth in Nigeria between 1970 and 2005. The cointegration test results suggest that financial deepening and economic growth are positively cointegrated and that there is only one cointegrating vector indicating a stable and sustainable long-run equilibrium relationship in the Full Information Maximum Likelihood (FIML) Multivariate Johansen and Juselius (1988, 1992) and Juselius (1990) framework. In the Toda-Yamamoto sense, the study finds that the Nigerian evidence supports the demand-following hypothesis for "bank-based" financial deepening variables like private sector credit and broad money; while it supports the supply-leading hypothesis for "bank-based" financial deepening variables like loan deposit ratio and bank deposit liabilities. Thus, the empirical findings suggest that the choice of bank-based financial deepening variable influences the causality outcome.
Published in 2008.
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