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http://hdl.handle.net/10419/50832
  
Title:What determines the finance-growth nexus? An endogenous growth model and empirical evidence PDF Logo
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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