Financial development, real sector and economic growth: Evidence from emerging market economies

There is a developing concern among developed, developing, and emerging economies in relevance to increasing real sector expenditure across the world. As a result, all countries have started to increase their real sector expenditure by increasing the share of finance. Hence, this study aims to exami...

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Bibliographic Details
Published in:International journal of finance and economics 2021-10, Vol.26 (4), p.6156-6167
Main Authors: Raghutla, Chandrashekar, Chittedi, Krishna Reddy
Format: Article
Language:English
Subjects:
Economic development
Economic growth
Economics
emerging market economies
Emerging markets
Expenditures
financial development
Market economies
real sector
Sustainable development
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Summary:There is a developing concern among developed, developing, and emerging economies in relevance to increasing real sector expenditure across the world. As a result, all countries have started to increase their real sector expenditure by increasing the share of finance. Hence, this study aims to examine the effects of both financial development and real sector on economic growth; we choose five emerging market economies to explain the economic growth process between 2000 and 2016. The results of long‐run elasticities document that real sector and financial development play a significant role in promoting economic growth. The results also suggest that money supply, exchange rate and inflation have a considerable positive effect on economic growth, respectively. Given these findings, we suggest that both governments and policy makers of the BRICS nations to initiate more effective policies to increase the real sector expenditure and develop financial sector. The increasing real sector will allow the economies to grow further by ensuring sustainable economic development across the BRICS member countries.
ISSN:1076-9307
1099-1158
DOI:10.1002/ijfe.2114