The causal interaction between financial development and human development in Bangladesh

Abstract

This note investigates the causal relationship between financial development measured as the domestic credit to private sector (% of GDP) and human development measured by the Barro--Lee index in Bangladesh. The bootstrap causality tests with leverage adjustments are implemented in order to avoid any distributional assumption. It is found that human development is causing financial development. However, there is no significant causality running from financial development on human development. The policy implication of these empirical findings is also elaborated.