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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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    5. Michael Clemens & Samuel Bazzi, 2009. "Blunt Instruments: On Establishing the Causes of Economic Growth," Working Papers 171, Center for Global Development.
    6. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
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