Financial Market Structure and Finance-Growth Relationships in the BRICS

Kenneth Kalu, Huiqiang Wang

Abstract


This study examines financial market structure and the finance-growth relationship in the emerging markets of Brazil, Russia, India, China, and South Africa (BRICS).While causality runs from the stock market to economic growth in Brazil, credit drives economic growth in South Africa. On the other hand, our results show that causality runs from economic growth to financial development in Russia, India, and China. We explore the financial market structure and economic management arrangements of each country in order to explain the observed test results. In countries with extensive government controls over the financial sector, economic growth is more likely to drive to financial sector development. On the other hand, in open market economies with developed financial systems, causality is more likely to move from financial sector development to economic growth.

JEL Classification: G21, G28, G32, E44

Keywords: Financial Sector; Economic Growth; BRICS.


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References


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