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Who Benefits from Financial Development? New Methods, New Evidence

Author

Listed:
  • : Daniel J. Henderson

    (Department of Economics, Finance and Legal Studies, University of Alabama)

  • Chris Papageorgiou

    (Strategy, Policy and Review Department, International Monetary Fund, Washington, DC)

  • Christopher F. Parmeter

    (Department of Economics, University of Miami)

Abstract

This paper takes a fresh look at the impact of financial development on economic growth by using recently developed kernel methods that allow for heterogeneity in partial effects, nonlinearities, and endogenous regressors. Our results suggest that while the positive impact of financial development on growth has increased over time, it is also highly nonlinear with more developed nations benefiting while low-income countries do not benefit at all. We also conduct a novel policy analysis that confirms these statistical findings. In sum, this set of results contributes to the ongoing policy debate as to whether low-income nations should scale up financial reforms.

Suggested Citation

  • : Daniel J. Henderson & Chris Papageorgiou & Christopher F. Parmeter, 2012. "Who Benefits from Financial Development? New Methods, New Evidence," Working Papers 2013-07, University of Miami, Department of Economics.
    • Handle: RePEc:mia:wpaper:2013-07
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    More about this item

    Keywords

    Country heterogeneity; financial development; growth; nonlinearities; nonparametric regression; irrelevant variables;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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