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Further Evidence on the Finance and Growth Causality Avoiding measuring the Indirect Impact of Pro-Market Institutional Framework and Monetary Policy

  • Alexandre Rands


    (Universidade Federal de Pernambuco)

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    This paper uses the fact that there are different accesses to financial markets in Brazilian counties to test the hypothesis that finance development has a positive impact on GDP growth, through some cross section regressions. The advantages of such tests with respect to those relying on cross country regressions is that there are not institutional differences or monetary policy setup that are strongly correlated with finance development proxies. Therefore, the tests forwarded are able to better disentangle the impact of finance development from institutional and monetary policy effects. The results confirm the hypothesis that finance development boosts economic growth, although it is not possible to identify if this effect is only temporary, while the economy is in a transitional dynamics or if its impact is on the equilibrium growth rate.

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    Paper provided by Datamétrica Consultoria Econômica in its series Working Papers with number 57.

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    Length: 33 pages
    Date of creation: 2011
    Date of revision: 2011
    Handle: RePEc:dtm:wpaper:57
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    1. James B. Ang, 2007. "A Survey Of Recent Developments In The Literature Of Finance And Growth," Monash Economics Working Papers 03-07, Monash University, Department of Economics.
    2. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
    3. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
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