Financial Market Structure and Finance-Growth Relationships in the BRICS

Kenneth Kalu, Huiqiang Wang


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.

Full Text:



Angel, G., Alvarez, H., & Makunin, I. (2016, August 26). Russia: Industry Research—Banks. Frankfurt: Rating-Agentur Expert RA GmbH. Retrieved May 31, 2017 from

Bell, C., & Rousseau, P. (2001). Post-Independence India: A Case of Finance-Led Industrialization? Journal of Development Economics, 65(2): 153–175.

Berglof, E., & Bolton, P. (2002). The Great Divide and Beyond: Financial Architecture in Transition. Journal of Economic Perspectives, 16(1), 77–100.

Berglof, E., & Lehmann, A. (2009). Sustaining Russia’s Growth: The Role of Financial Reform. Journal of Comparative Economics, 37(2), 198–206.

Christopoulos, D., &Tsionas, E. (2004). Financial Development and Economic Growth: Evidence from Panel Unit Root and Co-integration Tests. Journal of Development Economics, 73(1), 55–74.

de Rambures, D., & Duenas, F. E. (2017). China’s Financial System: Growth and Inefficiency. New York: Palgrave Macmillan.

Demetriades, P., & Hussein, K. (1996). Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries. Journal of Development Economics, 5, 387–411.

Goldsmith, R. W. (1969). Financial Structure and Development. New Haven, CT: Yale University Press.

Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-Spectral Methods. Econometrica, 37(3), 424–438.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., &Vishny, R. (1997). Legal Determinants of External Finance. Journal of Finance, 52(3), 1131–1150.

Lavoie, M. (1985). Credit and Money: The Dynamic Circuit, Overdraft Economics and Post Keynesian Economics. In Marc Jarsulic (Ed.), Money and Macro Policy (pp. 63–84). Netherland: Springer

Levine, R. (1997). Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature, 33, 688–726.

Levine, R., &Zervos, S. (1998). Stock Markets, Banks, and Economic Growth. The American Economic Review, 88(3), 537–558.

Liang, Q., & Teng, J. (2006). Financial Development and Economic Growth: Evidence from China. China Economic Review, 17(4), 395–411.

Maclean, R. D., Zhang, T., & Zhao, M. (2012). Why Does the Law Matter? Investor Protection and Its Effects on Investment, Finance, and Growth. The Journal of Finance, 67(1), 313–350.

McKinnon, R. I. (1973). Money and Capital in Economic Development. Washington, DC: Brookings Institution.

Moore, B. (1988). Horizontalists and Verticalists: The Macroeconomics of Credit Money. Cambridge: Cambridge University Press.

O’Neill, J. (2011). The Growth Map: Economic Opportunity in the BRICs and Beyond. New York: Portfolio/Penguin.

O’Neill, J. (2013). The BRIC Road to Growth. London: London Publishing Partnership.

Odhiambo, N. M. (2014). Financial Systems and Economic Growth in South Africa: A Dynamic Complementarity Test. International Review of Applied Economics, 28(1), 83–101.

Panopoulou, E. (2009). Financial Variables and Euro Area Growth: A Non-Parametric Causality Analysis. Economic Modelling, 26(6), 1414–1419.

Peia, O., &Roszbach, K. (2015). Finance and Growth: Time Series Evidence on Causality. Journal of Financial Stability, 19, 105–118.

Rajan, R. G., &Zingales, L. (1998). Financial Dependence and Growth. American Economic Review, 88(3), 559–586.

Rioja, F., &Valev, N. (2004). Does One Size Fit All? A Reexamination of the Finance and Growth Relationship. Journal of Development Economics, 74, 429–447.

Robinson, J. (1952). The Rate of Interest and Other Essays. London: Macmillan.

Rousseau, P., & Wachtel, P. (1998). Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries. Journal of Money, Credit and Banking, 30, 657–678.

Samargandi, N., &Kutam, A. (2016). Private Credit Spillovers and Economic Growth: Evidence from the BRICS Countries. Journal of International Financial Markets, Institutions and Money, 44, 56–84.

Schumpeter, J. (1912). The Theory of Economic Development. Cambridge, MA: Harvard University Press.

Studart, R. (2000). Financial Opening and Deregulation in Brazil in the 1990s: Moving towards a New Pattern of Development Financing? The Quarterly Review of Economics and Finance, 40(1), 25–44.

World Bank. (2016). World Development Indicators. Retrieved June 5, 2017 from


  • There are currently no refbacks.

International Journal of Business and Economics is licensed under a Creative Commons Attribution 4.0 International License Based on a work at

Copyright © 2016-2019 International Journal of Business and Economics (IJBE)

ISSN (online) 2545-4137

Disclaimer: Articles on International Journal of Business and Economics (IJBE) have been previewed and authenticated by the Authors before sending for the publication. The Journal, Chief Editor and the editorial board are not entitled or liable to either justify or responsible for inaccurate and misleading data if any. It is the sole responsibility of the Author concerned.