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Financial Development and Economic Growth: A Meta-Analysis

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  • Petra Valickova
  • Tomas Havranek
  • Roman Horvath

Abstract

We analyze 1334 estimates from 67 studies that examine the effect of financial development on economic growth. Taken together, the studies imply a positive and statistically significant effect, but individual estimates vary a lot. We find that both research design and heterogeneity in the underlying effect play a role in explaining the differences in results. Studies that do not address endogeneity tend to overstate the effect of finance on growth. The effect seems to be weaker in poor countries, but it decreases worldwide after the 1980s. Our results suggest that stock markets support faster economic growth than other financial intermediaries. We find no evidence of publication bias in the literature.

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  • Petra Valickova & Tomas Havranek & Roman Horvath, 2013. "Financial Development and Economic Growth: A Meta-Analysis," William Davidson Institute Working Papers Series wp1045, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2013-1045
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    Keywords

    finance; development; growth; meta-analysis;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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