Abstract
This study analyzes the relationship between financial development and
socioeconomic progress in Colombia using a combined descriptive and causal
analysis approach at both the national and departmental levels. Financial
development is measured through credit to the private sector as a percentage
of GDP, while socioeconomic well-being is assessed through GDP, the Gini
index, the poverty incidence rate, and, as a robustness exercise, the Human
Development Index (HDI). The sample covers the period 1960-2022 for the
national level and 2006-2024 for the departmental level. For the causal
analysis, the Granger causality test is applied following the methodology
proposed by Dumitrescu and Hurlin (2012) for panel data. The descriptive
results indicate linear and favorable associations between financial
development and the main welfare indicators, except for the Gini index,
whose relationship appears to be nonlinear. In terms of causality, the
results show that at the national level the growth-led finance hypothesis
prevails, whereas at the departmental level the finance-led growth
hypothesis dominates. The analysis with the HDI confirms the robustness of
these findings.