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PurposeThe purpose of this paper is to consider the heterogeneous relationship among financial development, foreign direct investment (FDI) and economic growth, examining the possible directions of causality among them in both the short and long runs.Design/methodology/approachA sample of the G-20 countries over the period 1970–2016 is utilized. A vector error-correction model is used to consider the possible directions of causality among financial development, FDI and economic growth.FindingsResults suggest a cointegrating relationship among the three series. Although short-run links among the variables are mostly non-uniform, both financial development and FDI matter in the determination of long-run economic growth.Practical implicationsAttention must be paid to policies that promote financial development. This, in turn, calls for fostering incentives to guarantee continued support to liberalize the economy and promoting capital openness. Additionally, financial infrastructure should be improved to improve financial innovation. The establishment of a well-developed financial market, including well-functioning banks and other financial institutions, can facilitate further investment and an easier means of raising capital to support the activities of FDI. Economic growth can ultimately be elevated through both financial development and FDI.Originality/valueThe study considers a sample of the G-20 countries, which have received relatively little attention in the existing literature. In addition, the study concurrently analyses the trivariate causal relationship among financial development, FDI and economic growth, a topic on which there has been a dearth of research.

AbstractOver the past 30 years, the economies in Europe have undergone major transformations that have been powered by diffusion of information and communication technology (ICT), intensification of innovation, and reforms in the financial sector to support innovative endeavors. The primary objective of this study was to examine the causal relationships among ICT diffusion, innovation diffusion, venture capital investment, and economic growth for 25 countries in Europe for the period from 1989 to 2016. Using a vector error‐correction model, the study examines the underlying short‐run and long‐run relationships for the above variables. The empirical analysis shows that in the long run, venture capital investment, ICT diffusion, and innovation diffusion have significant impacts on economic growth in Europe. However, in the short run, the direction of the causality varies depending on the specific measures of ICT diffusion and innovation diffusion that are utilized. Results from this study provide valuable insights into the types of policies that will contribute to sustainable economic growth in Europe.

AbstractThis paper examines the relationship between banking sector development, stock market development, economic growth, and four other macroeconomic variables in ASEAN countries for the period 1961–2012. Using principal component analysis for the construction of the development indices and a panel vector auto‐regressive model for testing the Granger causalities, this study finds the presence of both unidirectional and bidirectional causality links between these variables. The study contributes to understanding the importance of the interrelationship between the variables and combines the different strands of the literature. It also contributes to the literature by focusing on a group of countries that have not been studied before. One particular policy recommendation is to make the banking sector more accessible for those country's inhabitants that do not have bank accounts. Another policy recommendation is to nurture stock market development, which will facilitate the increased raising of capital for investment purposes to enhance economic growth.

AbstractRapid technological development over the last three decades has enabled different sectors of the economy to be seamlessly integrated. This has had an important spill‐over impact on the wealth of countries across the globe. In this paper we examine the inter‐linkages between the banking sector and the insurance industry on the economic growth of the G‐20 countries between 1980 and 2014. Using the vector auto‐regression model and the Granger causality test, the study shows that in the long run, developments in the banking sector and insurance industry have had a significant impact on the economic growth of the G‐20 countries. In the short term, the inter‐relationships between the three factors prove to be more complex in that they differ by countries in different stages of development. Based on the empirical findings, this paper discusses the policies and strategies policy makers and banks and insurance companies should have in place in order to create sustained economic growth in an increasingly inter‐connected world.