Abstract:

Many regions across the world are in dire need of financial development and economic growth. Tentatively, a relationship between the concepts exists. However, the direction of causality is of great interest, particularly in relation to the country’s level of development. Financial development in developed countries tends to be more progressive than those of developing countries. This research studies the existence of a relationship between financial development and economic growth using a sample of BRICS countries for the period of 1996 to 2016. A balanced panel data analysis was used to analyse secondary data from five BRICS countries (Brazil, Russia, India, China and South Africa). Variables used include: GDP growth, foreign direct investment, population, real interest rates, gross fixed capital formation, and domestic credit to private sector, and were selected on the availability of data. To analyse relationships between economic growth and financial development, this study used time series data obtained from the World Bank and International Monetary Fund (IMF). Findings of the study suggest that there is a longrun and short-run relationship between economic growth and financial development to some degree. BRICS countries should focus on those variables that are more suitable to generate more growth within their economy as it may differ from one economy to another when referring to financial statistics and resources.

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