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Financial Development and Economic Growth in Latin America: Schumpeter is Right!

  • Manoel Bittencourt

    ()

    (Department of Economics, University of Pretoria)

In this paper we investigate the role of financial development, or more widespread access to finance, in generating economic growth in four Latin American countries between 1980 and 2007. The results, based on the relatively novel panel time-series analysis, confirm the Schumpeterian prediction which suggests that finance authorises the entrepreneur to invest in productive activities, and therefore to promote economic growth. Furthermore, given the characteristics of the sample of countries chosen, we also highlight the importance of macroeconomic stability, and all the institutional framework that it encompasses, as a necessary condition for financial development, and consequently for growth and prosperity in the region.

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File URL: http://www.up.ac.za/media/shared/61/WP/wp_2010_14.zp39409.pdf
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Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201014.

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Length: 23 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:pre:wpaper:201014
Contact details of provider: Postal: PRETORIA, 0002
Phone: (+2712) 420 2413
Fax: (+2712) 362-5207
Web page: http://www.up.ac.za/economics

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  2. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  3. Manoel Bittencourt, 2007. "Inflation and Financial Development: Evidence from Brazil," Ibero America Institute for Econ. Research (IAI) Discussion Papers 165, Ibero-America Institute for Economic Research.
  4. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  5. Manoel Bittencourt, 2010. "Financial development and inequality: Brazil 1985–1994," Economic Change and Restructuring, Springer, vol. 43(2), pages 113-130, May.
  6. Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc.
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  8. Bruno, Michael & Easterly, William, 1995. "Inflation crises and long-run growth," Policy Research Working Paper Series 1517, The World Bank.
  9. Yongfu Huang, 2005. "What determines financial development?," Bristol Economics Discussion Papers 05/580, Department of Economics, University of Bristol, UK.
  10. 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.
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  12. Agustin Carstens & Luis I. Jacome H., 2005. "Latin American Central Bank Reform: Progress and Challenges," Macroeconomics 0509022, EconWPA.
  13. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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  17. Huybens, Elisabeth & Smith, Bruce D., 1999. "Inflation, financial markets and long-run real activity," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 283-315, April.
  18. Manoel Bittencourt, 2010. "Democracy, Populism and Hyperinflation(s): Some Evidence from Latin America," Working Papers 169, Economic Research Southern Africa.
  19. Thorsten Beck & Ross Levine, 2002. "Stock Markets, Banks, and Growth: Panel Evidence," NBER Working Papers 9082, National Bureau of Economic Research, Inc.
  20. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  21. Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
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  24. Swamy, P A V B, 1970. "Efficient Inference in a Random Coefficient Regression Model," Econometrica, Econometric Society, vol. 38(2), pages 311-23, March.
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