Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/50832 
Year of Publication: 
2003
Series/Report no.: 
KOF Working Papers No. 73
Publisher: 
ETH Zurich, KOF Swiss Economic Institute, Zurich
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

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