近年来，金融业发展问题已引起各国政策制定者的关注，以确保经济稳步增长。因此，一些研究人员集中强调金融发展的重要性，以适当的经济增长。因此，对金融发展与经济增长的研究，进行了大量的研究。
大多数的实证研究表明，有正相关关系，金融发展与经济增长（Dermihan等人。，2011，Masih和可汗，2011，Christopoulos和茨奥纳斯，2004，Bittencourt，2012），。除此之外，卡尔德隆和刘（2003）支持金融发展对经济增长的积极影响。金融发展通过快速资本积累和生产率增长（卡尔德隆和刘，2003）刺激经济增长。另一方面，金融发展通过对外商直接投资吸引力的增加对经济增长的贡献（Anwar巴塞洛缪，2012）。和（2008）研究连接金融发展和经济增长的机制，马来西亚金融发展的目的是促进经济增长，促进私人储蓄和私人投资。它支持内生金融发展和经济增长模型的假设，金融部门通过提高投资效率促进更高的经济增长（昂，2008）。
虽然金融发展的积极作用是明确的，它也可能会对经济增长产生负面影响。金德尔伯格（1978）提出的不稳定预期和资产的过度杠杆化的情况可以对经济有严重的负面后果的猜测。根据明斯基（1991）的“金融不稳定假说”，在一个经济繁荣，它会鼓励高风险行为的采用。这将改变经济向繁荣阶段的投机性经济活动火上加油，导致企业拖欠贷款的偿还。因此，更高的财务成本和较低的收入都会导致更高的拖欠率。当破产发生时，经济会经历经济衰退。根据Eichengreen和阿尔特塔实证结果（2000）75个新兴市场的样本期间为1975年至1997年，调查结果表明，国内信贷快速增长是一个新兴市场的银行危机的关键因素。同样，Borio和Lowe（2002）使用年度数据的34个国家从1960到1999，他们的发现表明，在持续快速的信用与资产价格的大幅上涨，金融不稳定的概率似乎增加。
Recently, the issues of the development of financial sector have captured the attention of all countries policies maker to ensure a steadily economic growth. Hence, some of the researchers have focused to emphasize the importance of financial developing would to proper economic growth. Therefore many researches were being conducted to examine the financial development and the economic growth.
Most of the empirical studies suggest that there are positive relationship between the financial development and economic growth (Dermihan et al. , 2011, Masih and Khan, 2011, Christopoulos and Tsionas,2004, Bittencourt, 2012,),. Besides that, Calderon and Liu (2003) supports the positive impact of financial development on the economic growth. Financial development is stimulating the economic growth through rapid capital accumulation and productivity growth (Calderon and Liu, 2003). On the other hand, financial development has contributed to the economic growth through the increase of the attraction for foreign direct investment ( Anwar and Cooray, 2012). Ang (2008) that study about the mechanism linking the financial development and economic growth for Malaysia purpose the financial development is promoting the economic growth by promoting the private saving and private investment. It supports the hypothesis of endogenous financial development and growth models that financial sector is promoting higher economic growth through improved efficiency of investment (Ang, 2008).
Although the positive role of financial development is clear, it can also negatively affect economic growth. Kindleberger (1978) put forward that the instability of expectation and asset speculation regarding overleveraged situations can have severe negative consequences for an economy. According to Minsky’s (1991) “financial instability hypothesis”, during an economic boom, it will encourage the adoption of a riskier behavior. This will transform the economy to a boom phase fuelled by speculative economic activities and induce firms to default on their loan repayments. Consequently, higher financial costs and lower income can both lead to higher delinquency rates. When bankruptcies occur, the economy can experience economic recession. According to the empirical results of Eichengreen & Arteta (2000) using a sample of 75 emerging markets for the period 1975-1997, the finding indicate that rapid domestic credit growth is one of the key determinants of emerging market banking crises. Similarly, Borio & Lowe (2002) using annual data for 34 countries from 1960 to 1999, their finding show that when sustained rapid credit together with a large increases in asset prices, the probability of financial instability seem to be increase.
McKinnon (1973) and Shaw (1973) proposes that government restrictions on the operation of the financial system such as interest rate ceiling, direct credit programs and high reserve requirements may hinder financial deepening. This may in turn affects the quality and quantity of investments and retards the development in the financial systems. This implies that a poorly functioning financial system may negatively influence economic growth. Similarly, the financial endogenous growth developed by King & Levine (1993) also shows that financial repression may have a negative impact on financial development. During financial repression, financial development is less likely to be effective in stimulating economic growth in the presence of a repressed financial system. Rossi (1999) suggests that financial restraints can hamper financial development, implying that economic growth would be retarded if financial restraints imposed on the financial system are relaxed. Some extent of financial repression helps promote stable economic growth in Malaysia. However, an increase in the extent of financial liberalization seems to be harmful for development of the Malaysian financial system. (Ang, 2008)
Besides the result of positive and negative effect of financial development on economic growth, there is the research stated that financial development is not a important explanatory variable for explaining the economic growth ( Anwar and Sun, 2011).
Interestingly, there are also the mixed results from empirical studies for finance led growth. The results of Campos and Tan (2011) indicate that financial development is negatively affecting the economic growth in the short run and the positive effect of financial development contributing on economic growth is at the long-run relation. The most interesting result from this research is the financial development affects the growth is directly but not through growth volatility. On the other hand, Hassan et al. (2011) found out that the financial development is positively affecting the economic growth for the developing countries but for the developed countries financial development seems to have negative effect on the economic growth.
2.2 Review of the causality between financial development and economic growth
There are many researches had been done on the role of financial developement in stimulating the economic growth. Besides of the role of financial devleopement on the economic growth, the causal relationship between them should not be neglect due to this investigation would help in producing policies that generate more promising economic growth to the country.
Patrick (1966) has stated that the possible patterns for causal relationship can classifies as two which are demand following and supply leading. The demand following is means the growth of economy led to the demand for the financial services and the supply leadings is means the development of financial sector causes the expansion of the economy. However, there are also some other researches shows that the relationship between this two variables may be bidirectional or also can be absence of the causal link.
2.2.1 Financial development driven economic growth
The economic growth effect from the financial development is expected to be influenced from two ways which is the level of financial development and the level of the country’s economy development. As referring to Masten, Coricelli and Masten (2008), they have stated that significant positive effect of financial integration on the growth of economy is only for countries with sufficient absorptive capacity, measured by the level of financial development. With the higher financial development level, a further financial integration will stimulates the economic growth through greater capital accumulation and technological progress and therefore higher total factor of productivity. This statement is supported by Calderón and Liu (2003) who worked out a granger causality framework whereby the financial development is represented by capital accumulation measured in capital per capita growth (M2/GDP) and economic growth represented by the productivity growth and obtained the result where as more rapid capital accumulation, it increased the economic growth in the developing countries.
As for the level of country’s economy development, the developing countries which represented by a group of transition countries have a much positive effect or causal relationship on economic growth as compared to the developed countries which might even have converse relationship with the development of financial markets (Calderón and Liu 2003) and (Masten, Coricelli and Masten 2008). This implies that the developing countries have more room for financial and economic improvement.
Several researches have indicated that there is an uni-directional causality between the financial development and economic growth in the developing and developed countries through the use of time series data and panel data. Those researches would be Yang and Yi (2008) in the case of Korea, Christopoulos and Tsionas (2003) that used panel data from 10 developing countries, Rousseau and Vuthipadadorn (2005) which used time series data from 10 Asian economies.
Even though the financial deepening able to contributes more to the causal relationships in the developing countries (Calderón and Liu 2003) but the effect may vanish as financial development approaches the levels characterizing the developed countries as mentioned by Masten, Coricelli and Masten (2008).
2.2.2 Growth driven financial development
This relationship is showing that a good performance of economic growth will stimulate the financial development of a country. According to the recently research done by Allen, Bartiloro, & Kowalewski (2006), they find that in fact it is economic structure that determines financial structure, the latter financial developments and prevails in response to the needs of the real economy.
According to Demirguc-Kunt & Levine (2001), it could also be that economic structure determines financial structure as countries develop, their financial sectors develop as well. Furthermore, financial systems are more developed in high income countries and that their stock markets will perform better than banks in terms of efficiency. Moreover, Demirguc-Kunt & Levine (1996) report that countries with well-developed market-based institutions also have well-developed bank-based institutions; and countries with weak market-based institutions also have weak bank-based institutions. A high economic growth tends to have a better financial development, whereas a low or negative economic growth wills not much emphasizes in financial development.
However, we find that the causality runs from growth to finance in South Asia and in Sub-Saharan Africa, the two poorest regions in our sample. This result supports the views of Gurley & Shaw (1967), Goldsmith (1969), and Jung (1986), they hypothesized that in developing countries, growth leads finance because of the increasing demand for financial services. Since the economy is growing, there is an increasing demand for financial services that induces an expansion in the financial sector. This view is supported by Gurley and Shaw (1967), Goldsmith (1969), and Jung (1986).
Robinson (1952) suggests that financial development does not lead to higher economic growth. Instead, financial development responds passively to economic growth as a result of higher demand for financial services. When an economy expands, households and firms demand more financial services. In response to this greater demand for financial services, more financial institutions, financial products and services emerge, thereby leading to expansion of financial systems. As such, wealthier economies have a greater demand for financial services and are more able to afford a costly financial system. This implies that the level of real economy activity crucially affects financial development. This statement supported by Berthelemy & Varoudakis (1996), they found an expansion of financial systems may also be induced by economic growth. That is to say economic growth may create demand for more financial services and hence the financial system will grow in response to economic expansion. As economic activities grow, there will be more demand for both physical and liquid capital. Hence, growth in the real sector induces the financial sector to expand, and thereby increasing competition and efficiency in the financial intermediaries and markets.
2.2.3Bidirectional relation between financial development and economic growth
Furthermore, there are the evidence that shows that causal relationship between financial developement and economic growth may also be bidirectional. According to the research conducted by Abu-bader & Abu-qarn (2007) found there are bidirectional causality between economic growth and financial development in the Egypt by using all the financial measures. The evidence of causality from financial development of economic growth is after the country implement on the controlling for investment. So that, lead to the enhancement of investment efficiency through the rise in the private investment lead to a rebound in economic performance of Egypt in the late of year 1990s.
Besides that, Tarlok Singh (2008) that using on a time series basic for the India through the ECM method found that there is bidirectional Granger-causality between financial development and economic growth. Furthermore through the impulse response and variance decomposition analyses also provided similar evidence for bi-directional Granger-causality from the evidence response of per capita real GDP to financial interrelations ratio (FIR) is weak as compare to its response to new issue ratio (NIR). The evidence as the economic reform that started since July 1991 recognized the role of the financial sector in the economic growth and emphasized the removal financial market imperfection and the development of a sound and efficient financial sector in the economy. Hence a number of policy measurements have been adopted to develop and strengthen the financial sector. Due to the effort made, the economy of India has moved to financial liberalization with the discernible reduction in preemptions on the investible resources of the bank.
Moreover, Cesar Calderona and Lin Liub (2002) have examined on the developing countries and industries countries found that, the Granger causality from financial development to economic growth and the Granger causality from economic growth to financial development coexist in 87 of the developing countries and 22 of the industrial countries. Last but not least as according to the argument stated by Sajid Anwar & Lan Phi Nguyen (2011), Generally speaking, financial development not only increases the supply of capital but, given the appropriate host-country policies, it can also facilitate technological innovation. Technological innovation contributes to human capital formation which can further enhance the prospects of economic growth (in fact, it can be argued that a bi-directional causality exists between technological innovation and human capital formation). In other words, financial development can facilitate economic growth through direct as well as indirect channels.
However, Apart from developing country, there is evidence found in the developed country as Greece implied a bi-directional result as according to the research conducted by Hondroyiannis, Lolos, & Papapetrou (2005). That the result generated a bi-directional causality exists between real economic activity and the stock market capitalization and also between the real economic activity and bank credit. However, the estimated coefficients are small in magnitude, suggesting that the interrelation of financing and overall economic activity is limited. Thus in the long run the economic performance is only partially related to financing through intimidation. Besides, the contribution of the stock market financing to the growth processes substantially smaller compared to bank financing.
2.2.4 The absence of any causal link
As for the no causal link between financial development and economic growth, neither one of these changes, improvement or worsen on one side will cause any effect on to another side. In the review that we had done on the previous review, the absence of any causal link between the variables is rarely to be happened. One of the researches that stated that there is no causal link between financial development and economic growth would be from Ram (1999). But the research done by Ram (1999) is based on cross country analysis instead of time series analysis.
So, it is important that we determine and confirm the causality between the variables first before constructing any policies as it might bring no benefit at all if the policy is implemented when there does not exist any causal link between the variables.