An Empirical Study on the Finance-Growth Nexus in Brunei Darussalam

This study investigates the long-run relationship between financial development and economic growth in Brunei Darussalam and its direction of causality using data from 1975 to 2013. Previous studies on the finance-growth nexus have typically concluded that the financial sector is important to stimulate economic growth and vice versa. However, few studies to date have examined this relationship in the context of small, resource-abundant countries such as Brunei. 

Using several econometric techniques, this study finds that there is no bi-directional causality between financial development and economic growth in Brunei. However, it finds a significant long-run relationship between inflation and financial depth (measured by domestic credit to the private sector as a percentage of GDP). 

To access the full Working Paper: An Empirical Study on the Finance-Growth Nexus in Brunei Darussalam - A Target for Economic Diversification (PDF)