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Financial Development, Macroeconomic Stability and Growth


  • Marie Silvere MBOME



The present paper investigates the non-linear effects of financial development on economic growth, for a sample of 64 developed and developing countries from 1980 to 2010. Our analysis using traditional GMM techniques and panel smoothing transition regression model (PSTR), suggests that the benefits from financial development crucially depend on the level of economic and financial development. We find that, below a given level of income, financial development adversely affects growth. However, excessive finance tends to deter growth and increase macroeconomic instability.

Suggested Citation

  • Marie Silvere MBOME, 2016. "Financial Development, Macroeconomic Stability and Growth," Departmental Working Papers 2016-15, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2016-15

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    Cited by:

    1. Ugo Panizza, 2017. "Non-linearities in the Relationship between Finance and Growth," IHEID Working Papers 12-2017, Economics Section, The Graduate Institute of International Studies.

    More about this item


    Financial development; Economic growth; PSTR;

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models


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