Causal Linkages between Financial Development, Trade Openness and Economic Growth: Fresh Evidence from Innovative Accounting Approach in Case of Bangladesh

Abstract

This paper contributes to the literature by exploring the relationship between financial development, economic growth and trade openness in case of Bangladesh over the period 1975Q1-2011Q4. The ARDL bounds testing approach to cointegtaion and the innovative accounting approach for causality are used. Our results show that financial developpemnt, trade openness and economic growth are likned over the long-run. We find evidence in favor of the supply-side hypothesis while financial development and economic growth cause exports. Economic growth causes imports and feedback effect exists between trade openness and economic growth.

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