New evidence on the causality between financial system and economic growth in Brazil using time series in the frequency domain

Abstract:

This paper aims to present causality tests between financial system and economic growth in the frequency domain for Brazil. This approach allows to evaluate nonlinearities in the direction of the causality from short to longer terms. We employ Brazilian time series for GDP per capita and banking credit between 1960 and 2010. The results show variation in causality tests depending on the frequency of the cycles considered. In particular, there is evidence of that the financial system is a causal factor for long-term economic growth in Brazil.

Keywords:
economic growth; financial system; time series in frequency domain