Thresholds in the Finance-Growth Nexus: A Cross-Country Analysis

World Bank Economic Review, Forthcoming

22 Pages Posted: 26 May 2010 Last revised: 19 Dec 2011

See all articles by Hakan Yilmazkuday

Hakan Yilmazkuday

Florida International University (FIU) - Department of Economics

Date Written: March 25, 2011

Abstract

This paper investigates thresholds of inflation, government size, trade openness, and per capita income for the finance-growth nexus using five-year averages of standard variables for 84 countries from 1965 to 2004. The results suggest that (i) high inflation crowds out positive effects of financial depth on long-run growth, (ii) small government sizes hurt the finance-growth nexus in low-income countries, while large government sizes hurt high-income countries, (iii) low levels of trade openness are sufficient for finance-growth nexus in high-income countries, but low-income countries need higher levels of trade openness for similar magnitudes of the finance-growth nexus, (iv) catch-up effects through the finance-growth nexus are higher for moderate per capita income levels.

Keywords: Financial Development, Economic Growth, Thresholds, Cross-Country Analysis

JEL Classification: E31, E44, F36, O16, O47

Suggested Citation

Yilmazkuday, Hakan, Thresholds in the Finance-Growth Nexus: A Cross-Country Analysis (March 25, 2011). World Bank Economic Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1616154

Hakan Yilmazkuday (Contact Author)

Florida International University (FIU) - Department of Economics ( email )

11200 SW 8th Street
Miami, FL 33199
United States

HOME PAGE: http://faculty.fiu.edu/~hyilmazk/

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