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

Author

Listed:
  • Marcelo P. Dabós

    (Universidad de Belgrano)

  • Ernesto Gantman

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

Abstract

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.

Suggested Citation

  • Marcelo P. Dabós & Ernesto Gantman, 2010. "The Fading Link? A New Empirical Analysis of the Relationship Between Financial Development and Economic Growth," Working Papers 2010-013, Becker Friedman Institute for Research In Economics.
  • Handle: RePEc:bfi:wpaper:2010-013
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    File URL: https://econresearch.uchicago.edu/sites/econresearch.uchicago.edu/files/BFI_2010-013.pdf
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    References listed on IDEAS

    as
    1. Philippe Aghion & Peter Howitt & David Mayer-Foulkes, 2005. "The Effect of Financial Development on Convergence: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 173-222.
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    8. Alesina, Alberto & Spolaore, Enrico & Wacziarg, Romain, 2005. "Trade, Growth and the Size of Countries," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 23, pages 1499-1542 Elsevier.
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    10. 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.
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    Cited by:

    1. repec:rss:jnljee:v4i5p1 is not listed on IDEAS
    2. Pasali, Selahattin Selsah, 2013. "Where is the cheese ? synthesizing a giant literature on causes and consequences of financial sector development," Policy Research Working Paper Series 6655, The World Bank.
    3. Alimi, R. Santos, 2015. "Financial deepening and economic growth: A System GMM Panel Analysis with application to 7 SSA countries," MPRA Paper 65789, University Library of Munich, Germany.
    4. repec:rss:jnljfe:v1i4p2 is not listed on IDEAS

    More about this item

    Keywords

    financial development; economic growth; institutional quality; market size;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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