Financial Development and Economic Growth: Toda and Yamamoto causality test in ALGERIA

Abstract

The main objective of this paper is to examine the relationship between financial  development and economic growth with the emphasis on the transmission channels as far  as the influence of the financial system on economic growth in Algeria. We employ a  time series analyses approach as adopted by Toda and Yamamoto (1995) causality test.  Here, three indicators are employed, that are, domestic credit to private sector to GDP,  real GDP per capita, and real Gross Fixed Capital Formation. Our main results find an  existence of the causal relationship between financial development and economic  growth, the evidence presented in this paper provides strong and robust support to the  view that financial sector development is crucial for economic growth and the efficiency  of the financial sector is potentially important for the long-term growth performance of  Algeria.