Template-type: ReDIF-Paper 1.0
Author-Name: Felix Rioja
Author-Email:prcfkr@langate.gsu.edu
Author-Homepage:http://aysps.gsu.edu/RiojaF.html
Author-Workplace-Name:  International Studies Program. Andrew Young School of Policy Studies, Georgia State University
Author-Workplace-Homepage:  https://icepp.gsu.edu/
Author-Name: Neven Valev 
Author-Email: nvalev@gsu.edu
Author-Homepage: http://aysps.gsu.edu/ValevN.html
Author-Workplace-Name:  International Studies Program. Andrew Young School of Policy Studies, Georgia State University
Author-Workplace-Homepage:  https://icepp.gsu.edu/
Title: Financial Development and Growth: A Positive, Monotonic Relationship?
Abstract: The relationship between financial development and economic growth has 
 received a lot of attention in the economic literature in recent years. The consensus 
 finding, which has also become widely accepted by policymakers, is that financial 
 development has a positive, monotonic effect on growth. In this paper, we propose that 
 the relationship between financial development and growth may not be uniform, but varies 
 according to the level of financial development of the country. In particular, we 
 hypothesize that there exist three distinct regions of financial development. In the
 low region (countries with very low levels of financial development), additional 
 improvements in financial markets have an uncertain effect on growth. In the intermediate
 region, financial development has a large, positive effect on growth. Finally, in the
 high region, additional financial improvements have a positive, but smaller effect on 
 growth. We examine a panel of 74 countries using GMM dynamic panel techniques and find 
 support for the different regions. 
Keywords: financial development, economic growth
Length: 28 pages
Creation-Date: 2002-05-01
File-URL: http://icepp.gsu.edu/files/2015/03/ispwp0207.pdf
File-Format: Application/pdf
Handle: RePEc:ays:ispwps:paper0207