Journal
WORLD DEVELOPMENT
Volume 68, Issue -, Pages 66-81Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.worlddev.2014.11.010
Keywords
financial development; economic growth; pooled mean group estimation; dynamic panel threshold; non-monotonicity
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We revisit the relationship between financial development and economic growth in a panel of 52 middle-income countries over the 1980-2008 period. Using pooled mean group estimations in a dynamic heterogeneous panel setting, we show that there is an inverted U-shaped relationship between finance and growth in the long run. In the short run, the relationship is insignificant. This suggests that too much finance can exert a negative influence on growth in middle-income countries. The finding of a non-monotonic effect of financial development on growth is confirmed by estimating a threshold model. (C) 2014 Elsevier Ltd. All rights reserved.
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