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The Fading Link? A New Empirical Analysis of the Relationship Between Financial Development and Economic Growth

  • Marcelo P. Dabós

    (Universidad de Belgrano)

  • Ernesto Gantman

    (Universidad de Buenos Aires; Universidad de Belgrano, Argentina)

This paper contributes to the literature on the finance-growth link by presenting new findings based on a new, larger dataset that improves over earlier studies in its greater coverage in terms of time periods and countries, as well as the incorporation of additional control variables like institutional quality and the size of the economy. Our results demonstrate that financial development does not have a statistically significant effect on economic growth. We also find that the economy's size is a statistically significant determinant of growth.

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Paper provided by Becker Friedman Institute for Research In Economics in its series Working Papers with number 2010-013.

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Date of creation: 2010
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Handle: RePEc:bfi:wpaper:2010-013
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  1. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
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  12. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2004. "Financial development and economic growth: evidence from panel unit root and cointegration tests," Journal of Development Economics, Elsevier, vol. 73(1), pages 55-74, February.
  13. Rousseau, Peter L. & Wachtel, Paul, 2002. "Inflation thresholds and the finance-growth nexus," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 777-793, November.
  14. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
  15. Mouawiya Al-Awad & Nasri Harb, 2005. "Financial development and economic growth in the Middle East," Applied Financial Economics, Taylor & Francis Journals, vol. 15(15), pages 1041-1051.
  16. Kim, J.Y. & Lee, J.W., 2000. "Technological Change, investment in Human Capital, and Economic Growth," Papers 29, Chicago - Graduate School of Business.
  17. Paul Grimes & Deborah Lee, 2000. "Economic education and economic growth," Atlantic Economic Journal, International Atlantic Economic Society, vol. 28(4), pages 490-490, December.
  18. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  19. N M Odhiambo, 2008. "Financial Development in Kenya: a Dynamic Test of the Finance-led Growth Hypothesis," Economic Issues Journal Articles, Economic Issues, vol. 13(2), pages 21-36, September.
  20. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 657-78, November.
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