The Banking Sector, Capital Markets, and Real Economic Activity in Peru: An Empirical Causality Analysis

This paper investigates the empirical causality between the evolution of the banking sector, the capital market and the real economic activity level in Peru during the period 1992-2012. Two methodologies are applied: (i) A modified Granger test taken from Toda y Yamamoto (1995) and (ii) Weak and strong exogeneity tests. The results show that the real economic activity level as well as the development of the capital market are good predictors for the banking sector evolution. (Audio: Department of Economic Publications)