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Financial development, oil dependence and economic growth: Evidence from the Republic of Yemen

Badeeb, Ramez Abubakr, Lean, Hooi Hooi·2017·Studies in Economics and Finance
DOI 10.1108/sef-07-2014-0137
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Abstract

Purpose: This paper aims to examine the validity of the question of whether oil dependence has a negative impact on the relationship between financial development and economic growth in Yemen. Design/methodology/approach: The auto-regressive distributed lag approach for cointegration is used to examine the relationship between financial development and economic growth by capturing the impact of oil dependence on this relationship. The Granger causality test, based on a vector error correction model (VECM) framework, is used to investigate the causal relationships between financial development and economic growth. Findings: The most interesting finding is the negative sign of interaction term between financial development and oil dependence, which implies that the positive effect of financial development on economic growth decreases with the increasing oil dependence. The result of the VECM Granger causality test revealed the existence of unidirectional causality running from financial development to economic growth. Research limitations/implications: The short sample period and the worry of losing degrees of freedom limited us when including control variables in the model. If the data are available in the future, other control variables can be added. Practical implications: The government should reduce the level of oil dependence in Yemen by diversifying the country’s economy. Accelerating the pace and efficiency of the financial sector will bear fruitful returns in this regard. The government could achieve this strategy by playing a more proactive role in encouraging the expansion of credit to enable the financial sector to provide a more efficient intermediary role in mobilizing domestic savings and channeling them to productive investments across various economic sectors. Originality/value: This is the first study to examine the impact of oil dependence on the finance-growth nexus in Yemen. A new indicator for oil dependence is also proposed.

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Metadata

Authors
Badeeb, R. A., & Lean, H. H.
Affiliations
Universiti Sains Malaysia (MY)
ORCID
Venue
Studies in Economics and Finance
Publisher
Emerald
Published
2017-06-05
Volume
34
Issue
2
Pages
281-298
ISSN
1086-7376 (ISSN-L)
DOI
10.1108/sef-07-2014-0137
OpenAlex
W2607446057
Cited by
48
References
3
Citations by year
2026: 1 · 2025: 9 · 2024: 5 · 2023: 4 · 2022: 11 · 2021: 3 · 2020: 7 · 2019: 3 · 2018: 3 · 2017: 1
FWCI
8.09
Type
journal article
Language
en
Open access
closed
Licence
www.emerald.com/insight/site-policies (tdm)
Locations
  • Studies in Economics and Finance (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Development
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Natural Resources and Economic Development
Keywords
financial development, oil dependence, economic growth, finance-growth nexus, Yemen, economic diversification, credit growth, causality between finance and growth

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CoChat. (2026). Citation check: Financial development, oil dependence and economic growth: Evidence from the Republic of Yemen. https://app.cochat.ai/papers/10.1108/sef-07-2014-0137
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Badeeb, R. A., & Lean, H. H. (2017). Financial development, oil dependence and economic growth: Evidence from the Republic of Yemen. Studies in Economics and Finance. https://doi.org/10.1108/sef-07-2014-0137