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Finance, institutions and economic development

Author

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  • Panicos Demetriades

    (Department of Economics, University of Leicester, UK)

  • Siong Hook Law

    (Department of Economics, University Putra Malaysia, Malaysia)

Abstract

Using data from 72 countries for the period 1978-2000, we find that financial development has larger effects on GDP per capita when the financial system is embedded within a sound institutional framework. Moreover, we find that financial development is most potent in middle-income countries, where its effects are particularly large when institutional quality is high. Importantly, we also find that in low-income countries the influence of financial development is at its weakest; in these countries, more finance without sound institutions may not succeed in delivering long-run economic benefits. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Panicos Demetriades & Siong Hook Law, 2006. "Finance, institutions and economic development," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 245-260.
    • Handle: RePEc:ijf:ijfiec:v:11:y:2006:i:3:p:245-260
    DOI: 10.1002/ijfe.296
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    References listed on IDEAS

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