IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Is There an Optimum Level of Financial Activity?

This paper addresses the notion of an "optimum level of financial activity" that is contingent on a country's general level of development. Referring to threshold regressions and a bootstrap test for structural shift of the finance regressor in a growth equation, it is shown that countries gain less from a given level of financial activity, if the latter fails to keep up with or exceeds what would follow from a balanced expansion path. The paper contributes to the literature on the finance-growth nexus in providing empirical support for the notion of "balanced" financial development with a development specific optimum level of financial activity.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.kof.ethz.ch/publications/science/pdf/wp_106.pdf
Download Restriction: no

Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 05-106.

as
in new window

Length: 29 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:kof:wpskof:05-106
Contact details of provider: Postal:
Leonhardstrasse 21, CH-8092 Zürich

Phone: +41 44 632 42 39
Fax: +41 44 632 12 18
Web page: http://www.kof.ethz.ch
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
  2. Anthony M. Santomero & John J. Seater, 1999. "Is There an Optimal Size for the Financial Sector," Center for Financial Institutions Working Papers 98-35, Wharton School Center for Financial Institutions, University of Pennsylvania.
  3. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  4. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  5. Levine, Ross, 2002. "Bank-Based or Market-Based Financial Systems: Which Is Better?," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 398-428, October.
  6. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  7. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  8. Singh, Ajit, 1997. "Financial Liberalisation, Stockmarkets and Economic Development," Economic Journal, Royal Economic Society, vol. 107(442), pages 771-82, May.
  9. Tadesse, Solomon, 2002. "Financial Architecture and Economic Performance: International Evidence," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 429-454, October.
  10. Kevin Hoover & Harris Dellas, 2003. "Truth and Robustness in Cross-country Growth Regressions," Working Papers 11, University of California, Davis, Department of Economics.
  11. L. Deidda & B. Fattouh, 2001. "Non linearity between finance and growth," Working Paper CRENoS 200104, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  12. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  13. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," CRSP working papers 511, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  14. Marco Da Rin & Thomas Hellmann, 2001. "Banks as Catalysts for Industrialization," William Davidson Institute Working Papers Series 443, William Davidson Institute at the University of Michigan.
  15. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  16. Pablo Emilio Guidotti & Jose De Gregorio, 1992. "Financial Development and Economic Growth," IMF Working Papers 92/101, International Monetary Fund.
  17. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
  18. Bruno Amable & Jean-Bernard Chatelain & Olivier De Bandt, 2002. "Optimal capacity in the banking sector and economic growth," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00112535, HAL.
  19. Neven Valev & Felix Rioja, 2002. "Finance and the Sources of Growth at Various Stages of Economic Development," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0217, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  20. Giovanni Favara, 2003. "An Empirical Reassessment of the Relationship Between Finance and Growth," IMF Working Papers 03/123, International Monetary Fund.
  21. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  22. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  23. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May.
  24. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
  25. Bruce E. Hansen, 1997. "Threshold effects in non-dynamic panels: Estimation, testing and inference," Boston College Working Papers in Economics 365, Boston College Department of Economics.
  26. Paul Harrison & Oren Sussman & Joseph Zeira, 1999. "Finance and growth: theory and new evidence," Finance and Economics Discussion Series 1999-35, Board of Governors of the Federal Reserve System (U.S.).
  27. Lee, Jaewoo, 1996. "Financial development by learning," Journal of Development Economics, Elsevier, vol. 50(1), pages 147-164, June.
  28. Benhabib, Jess & Spiegel, Mark M, 2000. "The Role of Financial Development in Growth and Investment," Journal of Economic Growth, Springer, vol. 5(4), pages 341-60, December.
  29. Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 221-248, April.
  30. Rousseau, Peter L. & Wachtel, Paul, 2002. "Inflation thresholds and the finance-growth nexus," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 777-793, November.
  31. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kof:wpskof:05-106. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.