Interaction Effects in the Relationship between Growth and Finance

Capitalism and Society, Volume 1, Issue 1, Article 2, 2006

29 Pages Posted: 27 Aug 2012

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Date Written: August 27, 2012

Abstract

This paper analyzes how interacting financial development with initial income, macroeconomic volatility and policy variables, can improve our understanding of convergence and divergence across countries, and also restore the significance of correlations between growth and volatility and therefore between growth and macropolicy, even when controlling for country fixed effects or when eliminating countries with extreme policies or bad institutions.

Keywords: Financial development, convergence, volatility, interaction effects, countercyclical policy

Suggested Citation

Aghion, Philippe, Interaction Effects in the Relationship between Growth and Finance (August 27, 2012). Capitalism and Society, Volume 1, Issue 1, Article 2, 2006. Available at SSRN: https://ssrn.com/abstract=2137139

Philippe Aghion (Contact Author)

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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