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Non-linear finance-growth nexus

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  • Ho-Chuan Huang
  • Shu-Chin Lin

Abstract

This paper revisits the question of whether the finance-growth nexus varies with the stages of economic development. Using a novel threshold regression with the instrumental variables approach proposed by Caner and Hansen (2004) to the dataset used in Levine "et�al." (2000) we detect overwhelming evidence in support of a positive linkage between financial development and economic growth, and this positive effect is larger in the low-income countries than in the high-income ones. The data also reveal that financial development tends to have stronger impacts on capital accumulation and productivity growth in the low-income countries than in the high-income ones. The findings are robust to alternative financial development measures and conditioning information sets. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The European Bank for Reconstruction and Development.

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 17 (2009)
Issue (Month): 3 (07)
Pages: 439-466

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Handle: RePEc:bla:etrans:v:17:y:2009:i:3:p:439-466

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Cited by:
  1. Law, Siong Hook & Azman-Saini, W.N.W. & Ibrahim, Mansor H., 2013. "Institutional quality thresholds and the finance – Growth nexus," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5373-5381.
  2. Law, Siong Hook & Singh, Nirvikar, 2014. "Does too much finance harm economic growth?," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 36-44.
  3. Minjia Chen & Alessandra Guariglia, . "Financial constraints and firm productivity in China: do liquidity and export behavior make a difference?," Discussion Papers 11/09, University of Nottingham, GEP.

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