Financial Structure and Economic Growth Nexus Revisited

24 Pages Posted: 3 May 2019

See all articles by Lan Chu Khanh

Lan Chu Khanh

State Bank of Vietnam - Banking Academy of Vietnam

Date Written: April 5, 2019

Abstract

This paper empirically reassesses the long-debated relationship between financial structure and economic growth. Specifically, we examine whether the effect of financial structure on economic growth is affected by the financial structure disproportion, banking crisis, economic volatility, and level of financial development. We employ the generalized method of moments estimation to a large panel of 100 countries over the 1971-2015 period. Although the main result supports market-based view, the positive effect of stock market development relative to banking system decreases significantly if financial structure is unbalanced. Our findings are robust to a variety of sensitivity check, including different measures of financial structure, periods, and model specifications.

Keywords: financial structure, unbalanced financial system, economic growth, generalized method of moments

JEL Classification: E44, G20, O16

Suggested Citation

Chu Khanh, Lan, Financial Structure and Economic Growth Nexus Revisited (April 5, 2019). Available at SSRN: https://ssrn.com/abstract=3366872 or http://dx.doi.org/10.2139/ssrn.3366872

Lan Chu Khanh (Contact Author)

State Bank of Vietnam - Banking Academy of Vietnam ( email )

No.12, Chuaboc Street
Hanoi, Hanoi 10000
Vietnam
+84948788789 (Phone)

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