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Economic Growth and Financial System

Author

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  • Héctor Gustavo González Padilla

    (Central Bank of Argentina)

Abstract

This document provides empirical evidence about the role of the financial system on the growth of developing economies. In order to prove that relationship a panel data regression using a sample of 26 developing economies for the period 1961- 2005 is estimated. Instrumental variables methodology is used for econometric estimations. A positive relationship between financial development and economic growth was found. The estimates suggest that the financial system contributes to increase economic growth by improving investment allocation. Therefore, a properly functioning financial system is a necessary but not a sufficient condition to promote growth in developing economies.

Suggested Citation

  • Héctor Gustavo González Padilla, 2012. "Economic Growth and Financial System," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(65-66), pages 61-74, September.
  • Handle: RePEc:bcr:ensayo:v:1:y:2012:i:65-66:p:61-74
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    economic development; economic growth; financial development; financial intermediation;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • G2 - Financial Economics - - Financial Institutions and Services

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