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Stock markets, banks, and growth : correlation or causality?

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  • Beck, Thorsten
  • Levine, Ross

Abstract

The authors investigate the impact of stock markets and banks on economic growth using a panel data set for 1976-98 and applying recent generalized method of moments (GMM) techniques developed for dynamic panels. The authors illustrate econometrically the differences that emerge from different panel procedures. On balance, stock markets and banks positively influence economic growth--and these findings are not a result of biases induced by simulaneity, omitted variables, or inobserved country-specific effects.

Suggested Citation

  • Beck, Thorsten & Levine, Ross, 2001. "Stock markets, banks, and growth : correlation or causality?," Policy Research Working Paper Series 2670, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2670
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    References listed on IDEAS

    as
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    Cited by:

    1. Arena, Marco, 2006. "Does insurance market activity promote economic growth ? Country study for industrial and developing countries," Policy Research Working Paper Series 4098, The World Bank.
    2. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross & Maksimovic, Vojislav, 2000. "Financial structure and economic development - firm, industry, and country evidence," Policy Research Working Paper Series 2423, The World Bank.
    3. George Furstenberg & Ulf Kalckreuth, 2006. "Dependence on External Finance: An Inherent Industry Characteristic?," Open Economies Review, Springer, vol. 17(4), pages 541-559, December.
    4. Neelam Timsina, 2014. "Impact of Bank Credit on Economic Growth in Nepal," NRB Working Paper 22/2014, Nepal Rastra Bank, Research Department.
    5. Bonfiglioli, Alessandra, 2008. "Financial integration, productivity and capital accumulation," Journal of International Economics, Elsevier, vol. 76(2), pages 337-355, December.
    6. Karsten Staehr, 2005. "Reforms and Economic Growth in Transition Economies: Complementarity, Sequencing and Speed," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 177-202, December.
    7. Alessandra Bonfiglioli & Caterina Mendicino, 2004. "Financial liberalization, bank crises and growth: Assessing the links," Economics Working Papers 946, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Jorg Dopke, 2004. "How Robust is the Empirical Link between Business-Cycle Volatility and Long-Run Growth in OECD Countries?," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(1), pages 1-23.
    9. Bonfiglioli, Alessandra & Mendicino, Caterina, 2004. "Financial Liberalization, Banking Crises and Growth: Assessing the Links," SSE/EFI Working Paper Series in Economics and Finance 567, Stockholm School of Economics.
    10. Mr. Giovanni Favara, 2003. "An Empirical Reassessment of the Relationship Between Finance and Growth," IMF Working Papers 2003/123, International Monetary Fund.
    11. George M. von Furstenberg & Ulf von Kalckreuth, 2007. "Dependence on External Finance by Manufacturing Sector: Examining the Measure and its Properties," Economie Internationale, CEPII research center, issue 111, pages 55-80.
    12. Jellal, Mohamed, 2014. "Diaspora transferts finance et développement économique [Diaspora remittances finance and economic development]," MPRA Paper 57410, University Library of Munich, Germany.
    13. Bonfiglioli, Alessandra, 2005. "How Does Financial Liberalization affect Economic Growth?," Seminar Papers 736, Stockholm University, Institute for International Economic Studies.
    14. Waqar Ahmad & Mohammad Raza, 2013. "The Stock Market Volatility Loading with Macroeconomic Variables: KSE 100 Index as Evidence in Pakistan," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 1(3), pages 43-51.
    15. Neelam Timsina, 2014. "Bank Credit and Economic Growth in Nepal: An Empirical Analysis," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 26(2), pages 1-24, October.
    16. Neelam Timsina, 2015. "Impact of Bank Credit on Economic Growth in Nepal," Working Papers id:7271, eSocialSciences.

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