The effect of financial development on economic growth in Turkey: 1980-2020 period

The financial system has played an important role in ensuring economic growth. As a result of the studies carried out to date, different empirical findings have been obtained from the studies investigating the causal relationship between financial development and economic growth. In this study, the relationship between financial development and economic growth has been examined. The aim of the study is to examine the relationship between financial development and economic growth. Annual data were used in the study covering the 1980-2020 periods for Turkey. Real GDP as an indicator of economic growth loans given by banks to the private sector for financial development indicator, M2 money supply and savings were chosen. ADF unit root test was applied to measure the stationarity of the series. A cointegration relationship was found with the ARDL bounds test model. FMOLS and DOLS tests were applied to estimate the long-term coefficients of the variables. Finally, the Granger causality test was used in the study. According to the Granger causality test result, when we consider the credit and M2 variables, the supply leading hypothesis is valid. Keywords: Financial development, economic growth, Turkey, Finance