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The Effect of Financial Deepening on Economic Growth, Inequality, and Poverty: Evidence from 73 Countries

Author

Listed:
  • Sugiyanto Catur

    (Professor Faculty of Economics and Business, Universitas Gadjah Mada)

  • Yolanda Zefania

    (S.E. Alumni Faculty of Economics and Business, Universitas Gadjah Mada)

Abstract

This study aims to analyze the effect of financial deepening on economic growth, income inequality, and poverty rates in 73 countries during the period 1991–2015. Panel data regression and the interaction of dummy variables are used to measure the effect. The results indicate that financial deepening has positive effects on economic growth, but negative effects on income inequality and poverty rates; has significant effect on economic growth in advanced economies (AEs) and significant effect on income equality and poverty rates in emerging markets and developing economies (EMDEs). These findings show that countries have to be selective in developing their financial sectors as it either can have positive or negative effect.

Suggested Citation

  • Sugiyanto Catur & Yolanda Zefania, 2020. "The Effect of Financial Deepening on Economic Growth, Inequality, and Poverty: Evidence from 73 Countries," South East European Journal of Economics and Business, Sciendo, vol. 15(2), pages 15-27, December.
    • Handle: RePEc:vrs:seejeb:v:15:y:2020:i:2:p:15-27:n:2
    DOI: 10.2478/jeb-2020-0012
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    References listed on IDEAS

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    More about this item

    Keywords

    financial deepening; income inequality; poverty; panel data;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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