Trade Openness, Financial Development Index and Economic Growth

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The current paper addresses the issues relating to the financial development, economic growth and trade openness. We used appropriate econometric techniques in our analysis. The theoretical underpinnings has been well written and the overall write up is reasonably good. This paper constructs the financial development index using principal component analysis (PCA) and further investigates the direction of causality between openness, financial development index and economic growth applying Vector Error Correction Mechanism. The long run relationship between these variables have been also established using Johansen's cointegraton. Finally, the paper adds value to the existing earlier literature in the financial development area.

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