New Trends in Macroeconomics pp 39-52 | Cite as
Financial Intermediation and Economic Growth: A Semiparametric Approach
Summary
In this paper we examine the effect of financial development on economic growth in an additive Instrumental Variable (IV)-augmented Partially Linear Regression (PLR) model using panel data of 66 countries for the period 1961-1995. Three common measures of financial development are used. Our results show that the effect of the exogenous component of a financial intermediary development index on economic growth depends greatly on the definition and measurement of that index. Financial development affects growth in a positive but non-linear way using a Liquid Liabilities index and in an almost linear way when using a Private Credit index. The effect becomes ambiguous when a Commercial-Central Bank index is used.
Keywords
Corporate Governance Instrumental Variable Financial Development Trade Credit Financial IntermediationPreview
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