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Finance and the Sources of Growth at Various Stages of Economic Development

This paper studies the effects of financial development on the sources of growth in different groups of countries. Recent theoretical work shows that financial development may affect productivity and capital accumulation in different ways in industrial versus developing countries. This hypothesis is tested with panel data from 74 countries using GMM dynamic panel techniques. Results are consistent with the hypothesis: finance has a strong positive influence on productivity growth primarily in more developed economies. In less developed economies, the effect of finance on output growth occurs primarily through capital accumulation.

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File URL: http://icepp.gsu.edu/files/2015/03/ispwp0217.pdf
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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0217.

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Length: 29 pages
Date of creation: 01 Sep 2002
Date of revision:
Handle: RePEc:ays:ispwps:paper0217
Contact details of provider: Phone: 404-413-0235
Fax: 404-413-0244
Web page: http://aysps.gsu.edu/isp/index.html

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  1. Ross Levine, 1998. "The legal environment, banks, and long-run economic growth," Proceedings, Federal Reserve Bank of Cleveland, issue Aug, pages 596-620.
  2. Acemoglu, Daron & Aghion, Philippe & Zilibotti, Fabrizio, 2002. "Distance to Frontier, Selection, and Economic Growth," CEPR Discussion Papers 3467, C.E.P.R. Discussion Papers.
  3. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
  4. De Gregorio, Jose & Guidotti, Pablo E., 1995. "Financial development and economic growth," World Development, Elsevier, vol. 23(3), pages 433-448, March.
  5. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
  6. Luintel, Kul B. & Khan, Mosahid, 1999. "A quantitative reassessment of the finance-growth nexus: evidence from a multivariate VAR," Journal of Development Economics, Elsevier, vol. 60(2), pages 381-405, December.
  7. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  8. Roubini, Nouriel & Sala-i-Martin, Xavier, 1992. "Financial repression and economic growth," Journal of Development Economics, Elsevier, vol. 39(1), pages 5-30, July.
  9. repec:ner:tilbur:urn:nbn:nl:ui:12-3125519 is not listed on IDEAS
  10. Philip Arestis & Panicos Demetriades & Bassam Fattouh, 2003. "Financial Policies and the Aggregate Productivity of the Capital Stock: Evidence from Developed and Developing Economies," Eastern Economic Journal, Eastern Economic Association, vol. 29(2), pages 217-242, Spring.
  11. Thomas Lindh, 2000. "Short-Run Costs of Financial Market Development in Industrialized Economies," Eastern Economic Journal, Eastern Economic Association, vol. 26(2), pages 221-239, Spring.
  12. Acemoglu, Daron & Zilibotti, Fabrizio, 1996. "Was Prometheus Unbound by Chance? Risk, Diversification and Growth," CEPR Discussion Papers 1426, C.E.P.R. Discussion Papers.
  13. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  14. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
  15. repec:ner:tilbur:urn:nbn:nl:ui:12-3125520 is not listed on IDEAS
  16. Lee, Jaewoo, 1996. "Financial development by learning," Journal of Development Economics, Elsevier, vol. 50(1), pages 147-164, June.
  17. Panicos O. Demetriades & Philip Arestis, 1996. "Financial Development and Economic Growth: Assessing the Evidence," Keele Department of Economics Discussion Papers (1995-2001) 96/16, Department of Economics, Keele University.
  18. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633, March.
  19. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
  20. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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