Financial Development and Economic Growth in Morocco

Abstract

This paper attempts to examine the impact of financial development on economic growth through an econometric study that allows us to estimate a model that links Moroccan Gross Domestic Product to financial development indicators. Indeed, some economists suggest that there is a positive link between financial development and economic growth, while others confirm the opposite. In this respect, we have carried out a three-step approach: The first step is to check the properties of the time series used, stationarity and order of integration, using Dickey-Fuller unit root tests. The second step is to use the theory of Co-integration developed by Engle and Granger to examine the long-run relationship between gross domestic product and the variables that determine financial development. Finally, in the last step, we conducted a Granger causality direction test in an error correction model. The results show an order of integration of order one I(1) for each of the series studied. As for the Cointegration test, the result indicates that there is a long-run relationship between the financial performance variables and economic growth in Morocco during the period 2002 to 2020 for 19 observations. Thus, the financial sector has only a weak influence on the dynamics of economic activity in Morocco. Moreover, only the banking system contributes strongly to the financing of the Moroccan economy in the long run with a weak stock market. This means that Moroccan economic agents prefer to turn to financial intermediaries to finance their needs.

Keywords: Economic growth, Financial development, Cointegration, Error correction model, Morocco.

JEL Classification : C1, C3, E44, G00.

Article type: Empirical research.