Supply Leading versus Demand Following Hypothesis: Evidence from BRICS Countries
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Abstract: Emergence of BRICS countries has contributed in a big way towards the changing phase of the world economy. In this regard, it becomes imperative to explore the causal relationship between economic growth and financial development in these countries. This paper attempts to study this aspect by considering data from 2001 to 2018 for various financial and economic indicators. Standard panel unit root test has been used to check for stationarity. Further, panel Granger causality test has been used to understand the direction of causality. It has been observed that unidirectional causality runs from domestic credit to private sector to economic growth, GDP. Thus, supply leading hypothesis holds true for BRICS countries.
Keywords: Financial Development, Economic Growth, Panel, Stationarity, Granger Causality
JEL Classification Number: G0, O10, P34
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