Non-linearity between finance and growth

We present a simple model which establishes a non-linear and possibly non-monotonic relationship between financial development and economic growth. Applying a threshold regression model to King and Levine's (Q. J. Econ. 109 (1993) 83) data set, we find evidence consistent with the theoretical model. (C) 2002 Elsevier Science B.V. All rights reserved.