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Finance, growth and quantile parameter heterogeneity

  • Andini, Monica
  • Andini, Corrado

This paper argues that the effect of a financial stimulus on growth can vary along quantiles of the conditional growth distribution. We support this argument by presenting a theoretical finance–growth model, mainly inspired by Pagano (1993) and Canarella and Pollard (2004), where quantile parameter heterogeneity plays a role. In addition, controlling for a set of observed country characteristics and for all time-invariant characteristics, through the panel dataset of Levine et al. (2000), we present evidence that countries in the upper tail of the conditional growth distribution react more than countries in the lower tail to the same financial stimulus.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 40 (2014)
Issue (Month): C ()
Pages: 308-322

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Handle: RePEc:eee:jmacro:v:40:y:2014:i:c:p:308-322
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
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  3. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  4. Thorsten Beck & Ross Levine, 2002. "Stock Markets, Banks, and Growth: Panel Evidence," NBER Working Papers 9082, National Bureau of Economic Research, Inc.
  5. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
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  9. Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419r, Wisconsin Madison - Social Systems.
  10. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
  11. Durlauf,S.N. & Kourtellos,A. & Minkin,A., 2000. "The local Solow growth model," Working papers 21, Wisconsin Madison - Social Systems.
  12. David Roodman, 2007. "A Note on the Theme of Too Many Instruments," Working Papers 125, Center for Global Development.
  13. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  14. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  15. Schiavo, Stefano & Vaona, Andrea, 2008. "Poolability and the finance-growth nexus: A cautionary note," Economics Letters, Elsevier, vol. 98(2), pages 144-147, February.
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  19. Mello, Marcelo & Perrelli, Roberto, 2003. "Growth equations: a quantile regression exploration," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 643-667.
  20. Neven Valev & Felix Rioja, 2002. "Finance and the Sources of Growth at Various Stages of Economic Development," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0217, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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  26. Rioja, Felix & Valev, Neven, 2004. "Does one size fit all?: a reexamination of the finance and growth relationship," Journal of Development Economics, Elsevier, vol. 74(2), pages 429-447, August.
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  30. Ross Levine, 2003. "More on finance and growth: more finance, more growth?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 31-46.
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