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The effect of financial development on economic growth: evidence from the APEC countries, 1981--2000

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Author Info
Donny Tang
Abstract

Using the modified growth model, this study examines whether financial development would facilitate economic growth among the Asia-Pacific Economic Cooperation (APEC) countries from 1981 to 2000. It focuses on the effects of three aspects of financial development on growth: stock market, banking sector and capital flow. To control for the country-specific effect, the model is further estimated for the developed and developing member countries. Results suggest that among the three financial sectors, only the stock market development shows strong growth-enhancing effect, especially among the developed member countries. This positive relationship remains very robust even after controlling for the simultaneity bias. Thus, there is no evidence to suggest that the level of financial infrastructure development does affect the overall finance--growth relationship observed in this study.

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Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 16 (September)
Pages: 1889-1904
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Handle: RePEc:taf:applec:v:38:y:2006:i:16:p:1889-1904

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  3. Mauro, Paolo, 2003. "Stock returns and output growth in emerging and advanced economies," Journal of Development Economics, Elsevier, vol. 71(1), pages 129-153, June. [Downloadable!] (restricted)
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  6. Panicos O. Demetriades & Khaled A.Hussein, 1995. "Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries," Keele Department of Economics Discussion Papers (1995-2001) 95/13, Department of Economics, Keele University.
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  7. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300. [Downloadable!] (restricted)
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  11. Cartapanis, Andre & Dropsy, Vincent & Mametz, Sophie, 2002. "The Asian Currency Crises: Vulnerability, Contagion, or Unsustainability," Review of International Economics, Blackwell Publishing, vol. 10(1), pages 79-91, February. [Downloadable!] (restricted)
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  14. Kearney, Colm, 1999. "The Asian Financial Crisis," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 1999(1-Februar), pages 29-55. [Downloadable!]
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  16. Kassimatis, Konstantinos & Spyrou, Spyros I, 2001. "Stock and Credit Market Expansion and Economic Development in Emerging Markets: Further Evidence Utilizing Cointegration Analysis," Applied Economics, Taylor and Francis Journals, vol. 33(8), pages 1057-64, June. [Downloadable!] (restricted)
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  19. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2004. "Financial development and economic growth: evidence from panel unit root and cointegration tests," Journal of Development Economics, Elsevier, vol. 73(1), pages 55-74, February. [Downloadable!] (restricted)
  20. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
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  21. Levine, Ross, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Blackwell Publishing, vol. 9(4), pages 688-702, November. [Downloadable!] (restricted)
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  23. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank. [Downloadable!]
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