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Non-linearity between finance and growth

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Listed author(s):
  • Deidda, Luca
  • Fattouh, Bassam

Abstract

We present a simple model which establishes a non linear and possibly non monotonic relationship between financial development and economic growth. Applying a threshold regression model to King and Levineâ„¢s (1993) data set, we find evidence that is consistent with the main implications stemming from the theoretical model.

(This abstract was borrowed from another version of this item.)

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 74 (2002)
Issue (Month): 3 (February)
Pages: 339-345

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Handle: RePEc:eee:ecolet:v:74:y:2002:i:3:p:339-345
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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Find related papers by JEL classification:
  • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
  • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

References listed on IDEAS
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  1. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-1329, December.
  2. Khan, Aubhik, 2001. "Financial Development And Economic Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 5(03), pages 413-433, June.
  3. Devereux, Michael B & Smith, Gregor W, 1994. "International Risk Sharing and Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 535-550, August.
  4. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
  5. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
  6. Hansen, Bruce E., 2000. "Testing for structural change in conditional models," Journal of Econometrics, Elsevier, vol. 97(1), pages 93-115, July.
  7. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-751, August.
  8. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
  9. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
  10. Tullio Jappelli & Marco Pagano, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 83-109.
  11. repec:cup:macdyn:v:5:y:2001:i:3:p:413-33 is not listed on IDEAS
  12. Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, vol. 89(2), pages 484-489, June.
  13. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
  14. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
  15. LG Deidda, 2001. "Financial Institutions' Expertise and Growth Effects of Financial Liberalisation," Working Paper CRENoS 200105, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  16. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
  17. Xu, Zhenhui, 2000. "Financial Development, Investment, and Economic Growth," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 331-344, April.
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