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Financial Development and Economic Growth in Korea

  • Journal of Regional Studies and Development
  • Abbr : JRSD
  • 2012, 21(2), pp.55-73
  • Publisher : Institute for Poverty Alleviation and International Development: IPAID
  • Research Area : Social Science > Area Studies > Regional Studies in general > Comparative / Statistical Regional Studies

Jo,Gab Je 1

1계명대학교

Accredited

ABSTRACT

This paper attempts to find the nexus between financial development and economic growth in Korea, focusing on two issues: the causality between financial development and economic growth and the measurement of financial development. It was found that financial development Granger caused economic growth, but financial depth did not Granger cause economic growth. Conversely, economic growth did not Granger cause financial development or financial depth. The cointegration estimates show that economic growth in Korea has been positively related with financial development, while economic growth has been negatively related with financial depth, which is statistically significant. The impulse response function and variance decomposition confirm that financial development and investment have been the main driver of economic growth. Thus, this study could support the argument that financial development, not financial depth, has had positive effects on economic growth in Korea.

Citation status

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