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Financial Development and Economic Growth: A Meta-Analysis

  • Tomas Havranek
  • Roman Horvath
  • Petra Valickova

We analyze 1334 estimates from 67 studies that examine the effect of financial development on economic growth. Taken together, the studies imply a positive and statistically significant effect, but the individual estimates vary widely. We find that both research design and heterogeneity in the underlying effect play a role in explaining the differences in results. Studies that do not address endogeneity tend to overstate the effect of finance on growth. While the effect seems to be weaker in less developed countries, the effect decreases worldwide after the 1980s. Our results also suggest that studies using stock-market-oriented measures as a proxy for financial development tend to report larger positive effects on growth. We find little evidence of publication bias in the literature.

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Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2013/05.

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Date of creation: Jul 2013
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Handle: RePEc:cnb:wpaper:2013/05
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