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Private investment and financial development in a globalized world

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  • Yongfu Huang

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Abstract

Using recently developed panel data techniques on data for 43 developing countries over the period 1970-98, this paper provides an exhaustive analysis of causality between aggregate private investment and financial development. GMM estimation on averaged data, and a common factor approach on annual data allowing for global interdependence and heterogeneity across countries suggest positive causal effects going in both directions. The finding has rich implications for the development of financial markets and the conduct of macroeconomic policies in developing countries in an integrated global economy.

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Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 06/589.

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Length: 49 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:bri:uobdis:06/589

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Keywords: Private Investment; Financial Development; Global Interdependence; Common Factor Analysis; Panel Unit Root Test; Panel Cointegration Test;

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Cited by:
  1. Michael Enowbi-Batuo & Mlambo Kupukile, 2010. "How can economic and political liberalisation improve financial development in African countries?," Journal of Financial Economic Policy, Emerald Group Publishing, Emerald Group Publishing, vol. 2(1), pages 35-59, May.
  2. Conor O'Toole & Carol Newman, 2012. "Investment Financing and Financial Development: Firm Level Evidence from Vietnam," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp409, IIIS.
  3. Simplice A, Asongu, 2012. "Linkages between investment flows and financial development: causality evidence from selected African countries," MPRA Paper 38719, University Library of Munich, Germany.
  4. Simplice A, Asongu, 2012. "Financial development dynamic thresholds of financial globalization: evidence from Africa," MPRA Paper 44254, University Library of Munich, Germany.
  5. Yongfu Huang, 2005. "What determines financial development?," Bristol Economics Discussion Papers, Department of Economics, University of Bristol, UK 05/580, Department of Economics, University of Bristol, UK.
  6. Yongfu Huang, 2005. "Will political liberalisation bring about financial development?," Bristol Economics Discussion Papers, Department of Economics, University of Bristol, UK 05/578, Department of Economics, University of Bristol, UK.
  7. Yallwe, Hagos Alem & Buscemi, Antonino, 2011. "Money laundry and financial development," MPRA Paper 32219, University Library of Munich, Germany.
  8. Kinda, Tidiane, 2007. "Increasing private capital flows to developing countries: The role of physical and financial infrastructure," MPRA Paper 19163, University Library of Munich, Germany.

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