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Financial Structure and Economic Growth

  • Luintel, Kul B

    ()

    (Cardiff Business School)

  • Khan, Mosahid
  • Arestis, Philip
  • Theodoridis, Konstantinos

    ()

    (Cardiff Business School)

Recent empirical work on financial structure and economic growth analyzes multicountry dataset in panel and/or cross-section frameworks and conclude that financial structure is irrelevant. We highlight their shortcomings and re-examine this issue utilizing a time series and a dynamic heterogeneous panel methods. Our sample consists of fourteen countries. Tests reveal that cross-country data cannot be pooled. Financial structure significantly explains output levels in most countries. The results are rigorously scrutinized through bootstrap exercises and they are robust to extensive sensitivity tests. We also test for several hypotheses about the prospective role of financial structure and financial development on economic growth.

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Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2008/3.

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Length: 43 pages
Date of creation: Jan 2008
Date of revision:
Publication status: Published in Journal of Development Economics , 86 (2008) 181-200
Handle: RePEc:cdf:wpaper:2008/3
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Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers

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