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Thresholds in the Finance-Growth Nexus: A Cross-Country Analysis

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  • Hakan Yilmazkuday

Abstract

Thresholds of inflation, government size, trade openness, and per capita income for the finance-growth nexus are investigated using five-year averages of standard variables for 84 countries from 1965 to 2004. The results suggest that (i) high inflation crowds out positive effects of financial depth on long-run growth, (ii) small government sizes hurt the finance-growth nexus in low-income countries, while large government sizes hurt high-income countries, (iii) low levels of trade openness are sufficient for finance-growth nexus in high-income countries, but low-income countries need higher levels of trade openness for similar magnitudes of the finance-growth nexus, (iv) catch-up effects through the finance-growth nexus are higher for moderate per capita income levels. Copyright , Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/wber/lhr011
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Bibliographic Info

Article provided by World Bank Group in its journal The World Bank Economic Review.

Volume (Year): 25 (2011)
Issue (Month): 2 (May)
Pages: 278-295

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Handle: RePEc:oup:wbecrv:v:25:y:2011:i:2:p:278-295

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Cited by:
  1. Jean-pierre Allegret & Sana Azzabi, 2013. "Financial development, threshold effects and convergence in developing and emerging countries," Economics Bulletin, AccessEcon, vol. 33(3), pages 1899-1921.
  2. Marques, Luís Miguel & Fuinhas, José Alberto & Marques, António Cardoso, 2013. "Does the stock market cause economic growth? Portuguese evidence of economic regime change," Economic Modelling, Elsevier, vol. 32(C), pages 316-324.
  3. Herwartz, Helmut & Walle, Yabibal M., 2013. "State dependence in the finance-growth nexus: A functional coefficient approach," Center for European, Governance and Economic Development Research Discussion Papers 156, University of Goettingen, Department of Economics.
  4. Owen, Ann L. & Temesvary, Judit, 2012. "Foreign lending, local lending, and economic growth," MPRA Paper 39978, University Library of Munich, Germany.
  5. Pasali, Selahattin Selsah, 2013. "Where is the cheese ? synthesizing a giant literature on causes and consequences of financial sector development," Policy Research Working Paper Series 6655, The World Bank.
  6. Roberto Leon-Gonzalez & Thanabalasingam Vinayagathasan, 2013. "Robust Determinants of Growth in Asian Developing Economies: A Bayesian Panel Data Model Averaging Approach," GRIPS Discussion Papers 13-12, National Graduate Institute for Policy Studies.
  7. Jean-Pierre Allegret & Sana Azzabi, 2012. "Développement financier, croissance de long terme et effets de seuil," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(5), pages 553-581, December.
  8. Owen, Ann L. & Temesvary, Judit, 2014. "Heterogeneity in the growth and finance relationship: How does the impact of bank finance vary by country and type of lending?," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 275-288.
  9. Arshad Ali Bhatti & M. Emranul Haque & Denise R. Osborn, 2013. "Is the Growth Effect of Financial Development Conditional on Technological Innovation?," Centre for Growth and Business Cycle Research Discussion Paper Series 188, Economics, The Univeristy of Manchester.

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