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A semi-parametric panel data analysis on financial development-economic volatility nexus in developing countries

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  • Zouaoui, Haykel
  • Mazioud, Manel
  • Ellouz, Nidhal Ziedi

Abstract

This paper examines the effect of financial development on economic growth volatility in a sample of 50 developing countries from 1960 to 2016. Since no conclusive results have been provided by previous studies on such association, we employ a semi-parametric panel fixed-effects regression model as introduced by Baltagi and Li (2002). The semi-parametric model does not impose any functional restriction on the relationship between financial development and economic volatility and helps to capture the existence of non-linearities in the data. We find that the financial development-volatility relation is non linear with multiple turning points. Our findings make new evidences on the financial development-economic volatility nexus.

Suggested Citation

  • Zouaoui, Haykel & Mazioud, Manel & Ellouz, Nidhal Ziedi, 2018. "A semi-parametric panel data analysis on financial development-economic volatility nexus in developing countries," Economics Letters, Elsevier, vol. 172(C), pages 50-55.
    • Handle: RePEc:eee:ecolet:v:172:y:2018:i:c:p:50-55
    DOI: 10.1016/j.econlet.2018.08.010
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    More about this item

    Keywords

    Financial development; Economic growth volatility; Non-linearity; Developing countries; Semi-parametric analysis; Panel data;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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