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Can Dynamic Panel Data Explain the Finance-Growth Link? An Empirical Likelihood Approach

  • Umut Oguzoglu

    ()

    (Department of Economics, University of Guelph)

  • Thanasis Stengos

    ()

    (Department of Economics, University of Guelph)

The short run effect of the financial intermediary development on economic growth is analyzed using an unbalanced panel of 77 countries covering 35 years. Empirical Likelihood (EL) estimation is used and compared to more conventional GMM methods that weight moment conditions equally over the sample. However, if a part of the data is associated with only weak instruments, GMM estimators are subject to considerable small sample bias. EL appropriately re-weights the moment restrictions to deal with that problem. Using EL, we obtain more robust estimates of the effect of financial intermediation on economic growth than GMM.

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Paper provided by University of Guelph, Department of Economics and Finance in its series Working Papers with number 0502.

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Length: 29 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:gue:guelph:2005-2
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Web page: https://www.uoguelph.ca/economics/

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  1. Guido W. Imbens & Phillip Johnson & Richard H. Spady, 1995. "Information Theoretic Approaches to Inference in Moment Condition Models," Harvard Institute of Economic Research Working Papers 1736, Harvard - Institute of Economic Research.
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  10. McCaig, Brian & Stengos, Thanasis, 2005. "Financial intermediation and growth: Some robustness results," Economics Letters, Elsevier, vol. 88(3), pages 306-312, September.
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