Frequency Domain Causality Relationship Analysis Between Poverty, Economic Growth and Financial Development in Algeria

• Published in: Review of economic and business studies 2019-12, Vol.12 (2), p.93-111
• Main Authors: Hicham, Ayad, Mostefa, Belmokaddem, Eddin, Sari Hassoun Salah
• Format: Article
• Language: English
• Subjects: C20; Economic growth; Financial development; Frequency domain causality; G40; P46; Poverty reduction; Time domain causality
• ISSN: 1843-763X; 2068-7249
• DOI: 10.1515/rebs-2019-0094

Since the previous periods, poverty reduction has been a big concern for many countries especially in developing countries like Algeria; in this paper, we shall explore the causal relationship between poverty reduction, economic growth and financial development in Algeria during the period of 1970-2017, the aim of this research is to answer the question which sector causes the poverty reduction: real sector or financial sector? Therefore, we employed the modern frequency domain causality presented by with a comparison with the time domain causality under Lutkepohl (2006) procedure, the results suggest that there is unidirectional causality running from the real sector (economic growth) to poverty rates in the short and long run terms, also, we found that there is an unidirectional causality running from the financial sector to poverty rates only in the long run term, while another causality running from poverty rates to the financial sector but in the short run term. This article aims at contributing to enlarge the literature review by utilizing the frequency domain causality in the field of poverty studies because of its effectiveness to test the causalities in different frequencies.