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Financial Development, Economic Performance and Democracy

Author

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  • Zhenxiong Li
  • Hilary Ingham

Abstract

This paper investigates the long-term effect of financial development on economic growth using annual data for 67 countries over the period 1971 to 2007. Both autoregressive distributed lag (ARDL) and cross-sectionally augmented autoregressive distributed lag (CS-ARDL) models are applied to count for crosscountry heterogeneity and error cross-country dependence. The results uphold a positive and significant effect of financial development on long-run per capita output. There is also some evidence of a non-linear relationship between financial development and growth. However, the analysis also reveals that the results derive primarily from non-democratic countries.

Suggested Citation

  • Zhenxiong Li & Hilary Ingham, 2020. "Financial Development, Economic Performance and Democracy," Working Papers 291296033, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:291296033
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic growth; Financial development; Democracy;
    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
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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