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Is the Financial Development and Economic Growth Relationship Nonlinear?

  • Elena Ketteni

    (University of Cyprus)

  • Theofanis P. Mamuneas

    ()

    (University of Cyprus)

  • Thanasis Stengos

    ()

    (Department of Economics, University of Guelph)

  • Andreas Savvides

    (Oklahoma State University)

We study the relationship between financial development and economic growth to explore possible nonlinearities. We use the same data set as previous researchers but employ nonparametric estimation techniques. We find that, in contrast to recent research, the finance-growth relationship is linear when the previously documented nonlinearity between initial per capita income and human capital, on the one hand, and economic growth, on the other, is taken into account. When these nonlinearities are ignored, the finance-growth relationship appears nonlinear.

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Paper provided by University of Guelph, Department of Economics and Finance in its series Working Papers with number 0501.

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Length: 23 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:gue:guelph:2005-1
Contact details of provider: Postal: Guelph, Ontario, N1G 2W1
Phone: (519) 824-4120 ext. 53898
Fax: (519) 763-8497
Web page: https://www.uoguelph.ca/economics/

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