Dabos, Marcelo and Williams, Tomas (2009): A reevaluation of the impact of financial development on economic growth and its sources by regions.
Download (731kB) | Preview
This work estimates the impact of Private Credit to the private sector and Liquid Liabilities (as measures of financial development) on economic growth, capital growth and productivity growth for different regions. Estimations are conducted with a panel database of 78 countries and 35 years using GMM system estimator method for dynamic panel data, correcting by Windme¼er (2005) robust errors and using fewer and relevant instruments compared to the established procedure in the literature of financial development and economic growth. We consider four geographical regions, Latin Amerca, Europe and North America, Asia and Africa. The results with this new methodology, that improves the inference over the usual one used in the literature , suggest a significant effect of financial development in economic growth for the entire panel (for the measue of Liquid Liabilities) and Latin America. We find no evidence of an effect of our financial development measures over physical capital accumulation but there is a positive effect of financial development, measure by liquidity, over total factor productivity growth. The effect of financial development over economic growth is greater in the less developed regions.
|Item Type:||MPRA Paper|
|Original Title:||A reevaluation of the impact of financial development on economic growth and its sources by regions|
|Keywords:||Financial development, economic development, productivity growth, capital growth, financial intermediation, economic growth|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development
G - Financial Economics > G2 - Financial Institutions and Services
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity
|Depositing User:||Marcelo Dabos|
|Date Deposited:||08. Dec 2010 10:41|
|Last Modified:||15. Feb 2013 21:06|
Acemoglu, D., S. Johnson, and J. A. Robinson (2001): “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review, 91(5), 1369–1401.
Aghion, P., and P. W. Howitt (1998): Endogenous Growth Theory. Massachusetts Institute of Technology Press.
Arellano, M., and S. Bond (1991): “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,” Review of Economic Studies, 58(2), 277–97.
Arellano, M., and O. Bover (1995): “Another look at the instrumental variable estimation of errorcomponents models,” Journal of Econometrics, 68(1), 29–51.
Bagehot, W. (1873): Lombard Street, A Description of the Monetary Market. Homewood, IL:Richard Irwin.
Bebczuk, R. (1999): “Essays in Corporate Saving, Financial Development and Growth,” Discussion paper.
Bebczuk, R. (2009): “Corporate Finance, Financial Development and Growth,” mimeo, UNLP Economics Department.
Beck, Thorsten, D.-K. A., and R. Levine (2009): “Financial institutions and markets across countries and over time - data and analysis,” Policy Research Working Paper Series 4943, The World Bank.
Beck, T., A. Demirguc-Kunt, and R. Levine (2003): “Law, endowments, and finance,” Journal of Financial Economics, 70(2), 137–181.
Beck, T., R. Levine, and N. Loayza (2000): “Finance and the sources of growth,” Journal of Financial Economics, 58(1-2), 261–300.
Blundell, R., and S. Bond (1998): “Initial conditions and moment restrictions in dynamic panel data models,” Journal of Econometrics, 87(1), 115–143.
Clemens, M., and S. Bazzi (2009): “Blunt Instruments: On Establishing the Causes of Economic Growth,” Working Papers 171, Center for Global Development.
Dabós, M. (2008): “Mercado de capitales, sistema financiero y crecimiento económico,” Discussion paper, ADEBA.
Dapena, J. P. (2009): “Rol del mercado de capitales en el crecimiento de la economia: literatura y evidencia para Argentina,” CEMA Working Papers: Serie Documentos de Trabajo. 393, Universidad del CEMA.
De Gregorio, J., and P. Guidotti (1995): “Financial Development and Economic Growth,” World Development, 23(3), 433–448.
Easterly, W., and R. Levine (2003): “Tropics, germs, and crops: how endowments influence economic development,” Journal of Monetary Economics, 50(1), 3–39.
Engerman, S. L., and K. L. Sokoloff (1997): “Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States,” NBER Historical Working Papers 0066, National Bureau of Economic Research, Inc.
Fry, M. (1995): Money, Interest, and Banking in Economic Development. John Hopkins University Press.
Goldsmith, R. (1969): Financial Structure and Development. Yale University Press.
Gries, Thomas, K.-M., and D. Meierrieks (2008): “Financial Deepening, Trade Openness and Economic Growth in Latin America and the Caribbean,” Working Papers 17, University of Paderborn, CIE Center for International Economics.
Gurley, J. G., and E. S. Shaw (1955): “Financial Aspects of Economic Development,” American Economic Review, 45, 515–538.
King, R. G., and R. Levine (1993): “Finance and Growth: Schumpeter Might Be Right,” The Quarterly Journal of Economics, 108(3), 717–37.
King, R. G., and R. Levine (1994): “Capital fundamentalism, economic development, and economic growth,” Carnegie-Rochester Conference Series on Public Policy, 40(1), 259–292.
Levine, R. (2005): “Finance and Growth: Theory and Evidence,” in Handbook of Economic Growth, ed. by P. Aghion, and S. Durlauf, vol. 1 of Handbook of Economic Growth, chap. 12, pp. 865–934. Elsevier.
Levine, R., N. Loayza, and T. Beck (2000): “Financial intermediation and growth: Causality and causes,” Journal of Monetary Economics, 46(1), 31–77.
Lucas, R. J. (1988): “On the mechanics of economic development,” Journal of Monetary Economics, 22(1), 3–42.
McKinnon, R. (1973): Money and Capital in Economic Development. Brookings Institution.
Meier, G., and D. Seers (1984): Pioneers in Development. Oxford University Press.
Rioja, F., and N. Valev (2004a): “Does one size fit all?: a reexamination of the finance and growth relationship,” Journal of Development Economics, 74(2), 429–447.
Rioja, F., and N. Valev (2004b): “Finance and the Sources of Growth at Various Stages of Economic Development,” Economic Inquiry, 42(1), 127–140.
Robinson, J. (1952): The Generalization of the General Theory. MacMillan.
Roodman, D. (2009): “A Note on the Theme of Too Many Instruments,” Oxford Bulletin of Economics and Statistics, 71(1), 135–158.
Schumpeter, J. (1912): The Theory of Economic Development. Harvard University Press.
Shaw, E. (1973): Financial Deepening in Economic Development. Oxford University Press.
Wachtel, P., and P. L. Rousseau (2006): “What is happening to the impact of financial deepening on economic growth?,” Working Papers 06-15, New York University, Leonard N. Stern School of Business, Department of Economics.
Windmeijer, F. (2005): “A finite sample correction for the variance of linear efficient two-step GMM estimators,” Journal of Econometrics, 126(1), 25–51.