Financial Development, Macroeconomic Stability and Growth
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.
|Date of creation:||22 Nov 2016|
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