ABSTRACT

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.