On the Nexus Between Economic Growth and Bank-based Financial Development: Evidence from Morocco

In this paper, we investigate the causal link between bank-based financial development and economic growth in Morocco between 2003 and 2018 using a vector autoregression framework. We test for causality between economic growth and four different measures of bank-based financial development in the short and long run. Our results show that bank-based financial development causes economic growth in the short and long run. Moreover, our results show that economic growth only causes bank-based financial development in the long run. At last, we show that the Moroccan banking sector's integration with the international financial markets only affects the causal link between economic growth and bank-based financial development by providing short-run liquidity to Moroccan banks. Based on these results, barriers to the financial development of the Moroccan banking sector should be investigated, and public policy should focus on designing appropriate policies and programs to alleviate these barriers in order to stimulate the growth of the Moroccan economy