A causality analysis between financial development and economic growth for Botswana

Abstract

This paper analyses the causal relationship between financial development and economic growth in Botswana for the period 1977 to 2006, using Granger causality through cointegrated Vector Autoregression methods. The results show that there is a stable longrun relationship between financial development and economic growth. Financial development causes economic growth in Botswana. The causality runs from financial development to economic growth. The results suggest that the financial sector is important in the economic growth and development of Botswana. Financial intermediation and institutional financial reforms should be enhanced in order to promote Botswana’s economic growth.