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Financial development and growth: are the APEC nations unique?

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  • Mark M. Spiegel

Abstract

This paper examines panel evidence concerning the role of financial development in economic growth. I decompose the well-documented relationship between financial development and growth to examine whether financial development affects growth solely through its contribution to growth in factor accumulation rates, or whether it also has a positive impact on total factor productivity, in the manner of Benhabib and Spiegel (2000). I also examine whether the growth performances of a subsample of APEC countries are uniquely sensitive to levels of financial development. The results suggest that indicators of financial development are correlated with both total factor productivity growth and investment. However, many of the results are sensitive to the inclusion of country fixed effects, which may indicate that the financial development indicators are proxying for broader country characteristics. Finally, the APEC subsample countries appear to be more sensitive to financial development, both in the determinations of subsequent total factor productivity growth and in rates of factor accumulation, particularly accumulation of physical capital.

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Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Pacific Basin Working Paper Series with number 2001-04.

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Date of creation: 2001
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Handle: RePEc:fip:fedfpb:2001-04

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Keywords: Economic development ; Asia Pacific Economic Cooperation (Organization);

References

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  1. Clague, Christopher, et al, 1999. " Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic Performance," Journal of Economic Growth, Springer, vol. 4(2), pages 185-211, June.
  2. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  3. Bencivenga, V.R. & Smith, B.D., 1988. "Financial Intermediation And Endogenous Growth," RCER Working Papers 124, University of Rochester - Center for Economic Research (RCER).
  4. Malcolm Knight & Norman Loayza & Delano Villanueva, 1993. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 512-541, September.
  5. Beck, T.H.L. & Levine, R. & Loayza, N., 2000. "Finance and the sources of growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125520, Tilburg University.
  6. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  7. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  8. Jess Benhabib & Boyan Jovanovic, 1989. "Externalities and Growth Accounting," NBER Working Papers 3190, National Bureau of Economic Research, Inc.
  9. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
  10. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, octubre-d.
  11. Banerjee, Abhijit V & Newman, Andrew F, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 211-35, April.
  12. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  13. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  14. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
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Cited by:
  1. Ito, Hiro, 2006. "Financial development and financial liberalization in Asia: Thresholds, institutions and the sequence of liberalization," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 303-327, December.
  2. Chinn,M.D. & Ito,H., 2005. "What matters for financial development? : capital controls, institutions, and interactions," Working papers 4, Wisconsin Madison - Social Systems.
  3. Menzie D. Chinn, 2002. "The Compatability of Capital COntrols and Financial Development: A Selective Survey and Empirical Evidence," Asia Pacific Economic Papers 327, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.

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