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Further Evidence on the Finance and Growth Causality Avoiding measuring the Indirect Impact of Pro-Market Institutional Framework and Monetary Policy

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  • Alexandre Rands

    (Universidade Federal de Pernambuco)

Abstract

This paper uses the fact that there are different accesses to financial markets in Brazilian counties to test the hypothesis that finance development has a positive impact on GDP growth, through some cross section regressions. The advantages of such tests with respect to those relying on cross country regressions is that there are not institutional differences or monetary policy setup that are strongly correlated with finance development proxies. Therefore, the tests forwarded are able to better disentangle the impact of finance development from institutional and monetary policy effects. The results confirm the hypothesis that finance development boosts economic growth, although it is not possible to identify if this effect is only temporary, while the economy is in a transitional dynamics or if its impact is on the equilibrium growth rate.

Suggested Citation

  • Alexandre Rands, 2011. "Further Evidence on the Finance and Growth Causality Avoiding measuring the Indirect Impact of Pro-Market Institutional Framework and Monetary Policy," Working Papers 57, Datamétrica Consultoria Econômica, revised 2011.
    • Handle: RePEc:dtm:wpaper:57
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic growth; finance development; growth regressions; finance and growth.;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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