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Financial Development and Economic Growth: New Evidence

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  • Jennifer De la Cruz

    ( Pontificia Universidad Católica del Perú)

Abstract

Financial systems around the world have undergone considerable development. This paper ana-lyzes the effect of financial development on economic growth. It replicates the estimation of Becket al. (2000), one of the pioneering research papers in this field. Then, it tests the sensibility of theresults by expanding the sample of countries (99) and the period (1961–2010). This study con-tributes to the literature by analyzing differentiated effects when a country’s economic conditionsare incorporated. The results show that the positive impact of financial development on economicgrowth found by Beck et al. (2000) becomes non-significant if financial crises and macroeconomicinstability periods are taken into account. However, if income per capita level is considered, theimpact becomes positive and significant in high-income countries and decreases in low-income percapita countries. This impact is influenced by each country’s level of education, level of financialdeepening, and average inflation rate over the last ten years.

Suggested Citation

  • Jennifer De la Cruz, 2020. "Financial Development and Economic Growth: New Evidence," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 43(85), pages 47-64.
  • Handle: RePEc:pcp:pucrev:y:2020:i:81:p:47-64
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    File URL: https://revistas.pucp.edu.pe/index.php/economia/article/view/21976/21382
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial development; Economic growth; Dynamic panel analysis;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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