The Role of Financial Development for Economic Growth in Caribbean Islands
AbstractAghion, Howitt and Mayer Foulkes postulate that one mechanism by which financial development enhances economic growth is by increasing a nation’s ability to obtain frontier technology, which then increases the rate at which productive activity expands. This study empirically tests this hypothesis for a sample of 12 small island open economies of the Caribbean between 1980 and 2004. Possible simultaneity in the relationship between financial development and economic growth is accounted for by introducing a new proxy for financial development, for which its determination is uncorrelated with economic growth. The results of the empirical analysis shows that financial development enhances economic growth in the Caribbean by increasing country’s steady state level of income per capita, and not by the mechanism put forward by Aghion, Howitt, and Mayer Foulkes (2006).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 49566.
Date of creation: Dec 2009
Date of revision:
Financial Intermediaries; Economic Growth; Caribbean;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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