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A Fragile Link? A New Empirical Analysis of the Relationship between Financial Development and Economic Growth

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  • Ernesto R. Gantman
  • Marcelo P. Dab�s

Abstract

This article contributes to the literature on the finance-growth link by presenting new findings based on a new, larger dataset that is an improvement on earlier studies due to its greater coverage in terms of time periods and countries, as well as the incorporation of additional control variables such as institutional quality and the investment rate. Our results demonstrate that financial development does not have a statistically significant effect on economic growth, a finding that is robust to different model specification and estimation techniques. This suggests that the finance-growth link is not as strong as portrayed in the literature, being dependent on the sample of countries and time periods considered.

Suggested Citation

  • Ernesto R. Gantman & Marcelo P. Dab�s, 2012. "A Fragile Link? A New Empirical Analysis of the Relationship between Financial Development and Economic Growth," Oxford Development Studies, Taylor & Francis Journals, vol. 40(4), pages 517-532, December.
    • Handle: RePEc:taf:oxdevs:v:40:y:2012:i:4:p:517-532
    DOI: 10.1080/13600818.2012.728582
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    7. Shahbaz, Muhammad & Abosedra, Salah & Sbia, Rashid, 2013. "Energy Consumption, Financial Development and Growth: Evidence from Cointegration with unknown Structural breaks in Lebanon," MPRA Paper 46580, University Library of Munich, Germany.
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    13. Michiel Bijlsma & Clemens Kool & Marielle Non, 2018. "The effect of financial development on economic growth: a meta-analysis," Applied Economics, Taylor & Francis Journals, vol. 50(57), pages 6128-6148, December.
    14. Michiel Bijlsma & Andrei Dubovik, 2014. "Banks, Financial Markets and Growth in Developed Countries: a Survey of the empirical literature," CPB Discussion Paper 266.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Thierno Thioune, 2017. "Financial Instability and Inequality Dynamics in the WAEMU," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 2(1), pages 43-62, June.
    16. Nawaz, Kishwar & Lahiani, Amine & Roubaud, David, 2019. "Natural resources as blessings and finance-growth nexus: A bootstrap ARDL approach in an emerging economy," Resources Policy, Elsevier, vol. 60(C), pages 277-287.
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