The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?
48 Pages Posted: 18 Jun 2013
Date Written: May 2013
A large theoretical and empirical literature has focused on the impact of financial deepening on economic growth throughout the world. This paper contributes to the literature by investigating whether this impact differs across regions, income levels, and types of economy. Using a rich dataset for 150 countries for the period 1975–2005, dynamic panel estimation results suggest that the beneficial effect of financial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that these differences might be driven by regulatory/supervisory characteristics and related to differences in the ability to provide widespread access to financial services.
Keywords: Economic growth, Middle East, North Africa, Latin America, Caribbean, Oil exporting countries, Nonoil developing countries, Low-income developing countries, Banking sector, Stock markets, Access to capital markets, Economic models, Time series, Growth, Financial Development, Inclusive Growth, Financial Access, oil, banking, bank deposits, banking sector, bank supervision, banking services, banking system, bank credit, banking systems, banking crises, bank ownership, bank intermediation, state bank, bank financing, access to banking, access to bank, macroeconomic stability, capital adequacy, bank branches, banking supervision, bank depositors
JEL Classification: G20, O00, O40, O50, O53
Suggested Citation: Suggested Citation