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KOF Working Papers, KOF Konjunkturforschungsstelle, ETH Zürich >
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http://hdl.handle.net/10419/50832
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| Title: | | What determines the finance-growth nexus? An endogenous growth model and empirical evidence  |
| Authors: | | Graff, Michael Karmann, Alexander |
| Issue Date: | | 2003 |
| Series/Report no.: | | Arbeitspapiere // Konjunkturforschungsstelle, Eidgenössische Technische Hochschule Zürich 73 |
| 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. |
| Subjects: | | Financial Development Endogenous Growth Cross-country Regressions Institutions Non-linearities |
| JEL: | | O16 O42 O57 |
| Document Type: | | Working Paper |
| Appears in Collections: | | KOF Working Papers, KOF Konjunkturforschungsstelle, ETH Zürich
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