Commerce and Management

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Subject: search.filters.subject.Causality

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    Stock Market - Economic Growth Nexuses: Evidence from Asian Stock Markets
    (Department of Finance, University of Kelaniya., 2023) Wickramasinghe, N. T.; Deyshappriya, N. P. R.; Gunarathne, Y. M. C.
    Purpose: The main purpose of this study is to examine the relationship between stock market development and economic growth in Asian countries focusing on causality direction. Methodology: The study based top 10 stock exchanges in the Asian region and the secondary data mainly collected from World Development Indicators of the World Bank over the period of 1990-2020. Generalized Method of Moment (GMM) Dynamic Panel analysis along with panel unit root and cointegration tests were employed to accomplish the objectives of the study. Findings: The cointegration test emphasizes the existence of long-term relationship between stock market development and economic growth while the GMM dynamic panel analysis confirms the positive relationship between stock market development and economic growth of top 10 stock exchanges in the Asian Region. Moreover, reverse causality which runs from economic growth to stock market development has also been confirmed by the GMM dynamic panel analysis. Consequently, bi-directional causality between stock market development and economic growth exists in the top 10 Asian stock exchanges confirming both Finance-Led Growth Hypothesis and Growth-Led Finance Hypothesis. Hence, stock market and growth-oriented policies are recommended to be implemented to optimize the mutual benefits. Originality: One of the key significances of the study is that the study has constructed a composite index to measure stock market development rather than rely on conventional measures.
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    Causality between Public Expenditure and Economic Growth in Sri Lanka: A Time Series Analysis
    (University of Kelaniya, 2012) Kesavarajah, M.
    This paper examines the causality between public expenditure and economic growth in Sri Lanka using time series annual data over the period of 1977-2009. In particular, this study keeps a special focused on various selected components of public expenditure by applying a multivariate cointegration and Vector Error Correction Modeling (VECM) techniques. The empirical evidence suggests, in long run, public expenditure on education, agriculture, health and transport and communication have positive and statistically significant effects on economic growth while defense expenditure shows a negative but a statistically significant effect on economic growth. Granger causality analysis confirms that there is a unidirectional causality running from education expenditure to economic growth, defense expenditure to economic growth, and agriculture expenditure to economic growth, which supports the existence of Keynesian hypothesis in Sri Lanka. Analysis also indicates that existence of bidirectional causality between health expenditure and economic growth, transport and communication expenditure and economic growth. Therefore, the findings of this study provide an important implication to policy makers to improve the efficiency of public expenditure by reallocating among sectors in a growth context.
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    Financial Intermediation and Economic Growth: A Lesson from Sri Lanka
    (2011) Rexiang, W.; Rathanasiri, R.A.
    The relationship between finance and growth has been well documented in the economic literature. A considerable body of theoretical literature suggests a strong and positive link between financial development and economic growth. The purpose of this study is to examine whether financial intermediation leads to economic growth in a small open economy of Sri Lanka using time series macro data for the period 1977-2008. This basically investigates the channel and the effect of financial intermediation to economic growth with a new framework. The model framework of the study develops as per the endogenous growth theory. The model explains the joint effect of financial intermediation, trade openness and other economic factors on economic growth in Sri Lanka. This paper uses Engle-Granger two step methodologies to find out long term relationship between financial intermediation and economic growth. And, short run dynamic of the model is explained by granger causality test. The findings of the study revealed that financial intermediation impact on economic growth in the long run but the relationship is not strong. Further, study reveals that financial intermediation promotes growth through the productivity channel rather than accumulation of capital.