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Financial Development and Economic Growth: New Evidence from Panel Data

  • M. Kabir Hassan
  • Jung Suk-Yu

This study provides new evidence on the role of financial development in accounting for economic growth. To derive feasible policy implications, we estimate not only unbalanced panel regressions with period fixed effects, but also variance decompositions of annual GDP growth rates to examine what proxy measures are most important in economic growth over time and how much they contribute to economic growth across geographic regions and income groups. We find strong linkages between financial development and economic growth in high-income OECD countries, but not in South Asian and Sub-Saharan African regions. Therefore, it may be necessary to make different efforts to achieve steady economic growth across geographic regions and income groups.

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Paper provided by Indiana State University, Scott College of Business, Networks Financial Institute in its series NFI Working Papers with number 2007-WP-10.

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Length: 30 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:nfi:nfiwps:2007-wp-10
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