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Explaining the nonlinear effects of financial development on economic growth

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Abstract

Using different indicators of financial development, recent empirical studies have discovered various patterns of nonlinearity in the relationship between financial development and economic growth. By adding consumption loans, which are nonproductive, into a standard model of asymmetric information, this paper generates a model that is able to replicate all possible nonlinear finance–growth relationships found in recent empirical studies.

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  1. Department of Economics, National Taipei University, Taipei, 104, Taiwan, ROC

    Fu-Sheng Hung

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  1. Fu-Sheng Hung
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Correspondence to Fu-Sheng Hung.

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Hung, FS. Explaining the nonlinear effects of financial development on economic growth. J Econ 97, 41–65 (2009). https://doi.org/10.1007/s00712-008-0057-4

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  • DOI: https://doi.org/10.1007/s00712-008-0057-4

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