A Causality Analysis Between Financial Development and Economic Growth for Botswana

This paper analyses the causal relationship between financial development and economic growth in Botswana for the period 1977-2006, using Granger causality through cointegrated Vector Autoregression methods and two proxies for financial development. Results show that there is a stable long-run relationship between financial development and economic growth regardless of which proxy for financial development is used. Further, results provide evidence of supplyleading and demand-leading views of finance-growth nexus; thus, suggesting that enhancement of both financial markets and real economy’s activity would be an advisable development strategy for Botswana.