Is the Financial Development and Economic Growth Relationship Nonlinear?
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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|Date of creation:||2005|
|Date of revision:|
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