Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/96840 
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper No. 4743
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We revisit the relationship between financial development and economic growth in a panel of 52 middle income countries over the 1980-2008 period, using pooled mean group estimator in a dynamic heterogeneous panel setting. We show that financial development does not have a linear positive long-run impact on economic growth in this sample. When we consider a non-linear relationship between financial development and growth, we find an inverted U-shaped relationship between finance and growth in the long run. In the short-run, the relationship is insignificant. This finding suggests that middle income countries face a threshold point after which financial development no longer contributes to economic growth.
Subjects: 
financial development
economic growth
heterogeneous panels
pooled mean group estimation
non-monotonicity
JEL: 
C23
O11
O16
O47
Document Type: 
Working Paper
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