Degree Name

Master of Arts

Department or Program



Dr. AKM Mahbub Morshed


This paper aims to analyze the causality relationship between financial development and economic development. The pairwise Granger causality test was applied to data of South Africa, from 1966 to 2008, under Vector Error Correction Mechanism. Empirical analysis reveals two major facts. Firstly, the economic growth Granger causes the financial development. Secondly, there exist long-run and short-run causality relationships from economic growth to bank assets. A boom of economic activities seems to be the driving force behind the improvement of financial sectors. Consequently, policies aiming to foster the financial sector in South Africa should include the nature of increased economic activities.