What Determines the Finance-Growth Nexus? An Endogenous Growth Model and Empirical Evidence
Open access
Date
2003-06Type
- Working Paper
ETH Bibliography
yes
Altmetrics
Abstract
An endogenous growth model on finance and growth is formulated, and empirical analyses are conducted. The model exhibits structural shifts and breaks caused by institutional changes, suggesting that a linear approach is inadequate. To address this point empirically, we fit data for 90 countries from 1960–2000 to a standard growth equation with a proxy for financial activity. Firstly, it is shown that a growth enhancing outcome of financial activity is contingent on a sound institutional framework. Then, we order the sample by control variables which follow from the model as potential causes of breaks in the adjustment process. Threshold regressions reveal non-linearities that are consistent with the model. Most importantly, we find signs for excessive financial development. Show more
Permanent link
https://doi.org/10.3929/ethz-a-004555623Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
Cross-country Regressions; Non-linearities; Financial Development; Institutions; Endogenous GrowthOrganisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
Notes
See also http://e-citations.ethbib.ethz.ch/view/pub:188468.More
Show all metadata
ETH Bibliography
yes
Altmetrics