Acta Universitatis Danubius. Œconomica, Vol 13, No 3 (2017)

Abstract

According to literature, there are three schools of thought on the relationship between financial development, trade openness and economic growth. The first one is that a combination of financial development and trade openness influence economic growth whilst the second says that economic growth and financial development influence trade openness. The third says that both financial development and trade openness affect each other. The lack of consensus on the subject matter is the foundation upon which this study is built using the Vector Error Correction Model (VECM) with annual time data from 1994 to 2014 in Argentina. The study observed that there is a positive and significant uni-directional causality running from financial development to economic growth and from trade openness to financial development in Argentina in the long run. The study also noted the existence of a positive but weak uni-directional causality running from financial development to trade openness, trade openness to economic growth and from economic growth to trade openness in Argentina in the long run. These findings to a larger extent resonated with literature on the subject matter.