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The Impact of Bank-Based and Market-Based Financial Development on Economic Growth: Time-Series Evidence From the United Kingdom

S. Nyasha

Department of Economics, University of South Africa, P. O Box 392, UNISA 0003, Pretoria, South Africa

E-mail Address: sheillanyasha@gmail.com

Corresponding author.

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and

N. M. Odhiambo

Department of Economics, University of South Africa, P. O Box 392, UNISA 0003, Pretoria, South Africa

E-mail Address: nmbaya99@yahoo.com

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https://doi.org/10.1515/gej-2015-0036Cited by:4 (Source: Crossref)

Abstract

This paper examines the dynamic impact of both bank-based and market-based financial development on economic growth in the United Kingdom (UK) during the period 1980–2012, using the autoregressive distributed lag bounds testing approach. Given the complexity of the financial structure in the United Kingdom, various financial development indicators have been used to construct bank-based and market-based financial development indices. The empirical results of this study show that while market-based financial development has a positive impact on economic growth in the United Kingdom, bank-based financial development has a distinct negative impact. These results apply irrespective of whether the regression analysis is conducted in the long run or in the short run.

Keywords:

JEL: G10, G20, O16

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