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The Environmental Kuznets Curve: Is There a Financial Analogue?

In: HANDBOOK OF GLOBAL FINANCIAL MARKETS Transformations, Dependence, and Risk Spillovers

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  • Imad A. Moosa

Abstract

The objective of this chapter is to introduce the concept of the financial Kuznets curve (FKC) as an analogue to the already well-established notion of the environmental Kuznets curve (EKC). It is envisaged that the FKC can be introduced on the grounds that too much of a good thing is not good and that countries with large financial sectors are more susceptible to financial crises. The empirical results, based on a variety of econometric techniques, show that the adverse effect of financialization on growth materializes only at high levels of financialization as measured by the ratio of credit to GDP. This is why the FKC, which symbolizes the “finance curse” resulting from over-dependence on the financial sector, can be observed only in the case of high-income OECD countries, which have high levels of financialization.

Suggested Citation

  • Imad A. Moosa, 2019. "The Environmental Kuznets Curve: Is There a Financial Analogue?," World Scientific Book Chapters, in: Sabri Boubaker & Duc Khuong Nguyen (ed.), HANDBOOK OF GLOBAL FINANCIAL MARKETS Transformations, Dependence, and Risk Spillovers, chapter 19, pages 495-512, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813236653_0019
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    More about this item

    Keywords

    Market Integration; Risk Management; Risk Assessment; Financial Uncertainty; Volatility; Financial Markets; Financial Development; Country Risks; Sovereign Debt Markets;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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