FINANCIAL DEEPENING AND ECONOMIC GROWTH: EVIDENCE FROM BANGLADESH

The present study investigated the causal impact of financial deepening on economic growth in Bangladesh for the period of 1990 to 2022 applying cointegration analysis. The ratio of broad money to GDP, private sector credit to GDP and stock market capitalization to GDP used as proxies for financial deepening indicators in this study. Using Johansen co-integration test, the result of the study explored a positive and statistically significant relationship in the long run among the broad money to GDP, private sector credit to GDP, stock market capitalization to GDP and economic growth. Moreover, the error correction term supported the long-run association, and the variables adjust to their long-run equilibrium. The findings suggested that policymakers should promote policies that increase the money supply and market capitalization and ensure the private sector credit is channeled to the more productive sector which would help to support and boost economic growth in Bangladesh.