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Financial Development and Economic Growth in 43 advanced and developing economies over the period 1975–2009: Evidence of non-linearity

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  • Djeneba DOUMBIA

Abstract

This paper relies on the Panel Smooth Transition Regression (PSTR) model and three metrics of financial development to endogenously assess the non-linear impact of financial development on growth. Using a sample of 43 advanced and developing economies over the period 1975–2009, the paper highlights that financial development supports economic growth in low-income and lower middle income countries by enhancing saving and investment behaviour. However, in more developed economies, the impact of financial development tends to be weaker, reflecting that further credit provisioning in these economies tend to exacerbate financial vulnerabilities, which is detrimental to growth.

Suggested Citation

  • Djeneba DOUMBIA, 2016. "Financial Development and Economic Growth in 43 advanced and developing economies over the period 1975–2009: Evidence of non-linearity," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 16(1), pages 13-22.
  • Handle: RePEc:eaa:aeinde:v:16:y:2016:i:1_2
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    Citations

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    Cited by:

    1. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, vol. 100(4), pages 1875-1891, September.
    2. Jian Chai & Limin Xing & Quanying Lu & Ting Liang & Kin Keung Lai & Shouyang Wang, 2016. "The Non-Linear Effect of Chinese Financial Developments on Energy Supply Structures," Sustainability, MDPI, Open Access Journal, vol. 8(10), pages 1-21, October.

    More about this item

    Keywords

    Financial Development; Economic Growth; Non-linearity; System GMM; PSTR;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • 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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