Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/98628 
Year of Publication: 
2013
Series/Report no.: 
Working Paper No. 711
Publisher: 
University of California, Economics Department, Santa Cruz, CA
Abstract: 
This study provides new evidence on the relationship between finance and economic growth using an innovative dynamic panel threshold technique. The sample consists of 87 developed and developing countries. The empirical results indicate that there is a threshold effect in the finance-growth relationship. In particular, we find that the level of financial development is beneficial to growth only up to a certain threshold; beyond the threshold level further development of finance tends to adversely affect growth. These findings reveal that more finance is not necessarily good for economic growth and highlight that an optimal level of financial development is more crucial in facilitating growth.
Subjects: 
Finance
economic growth
threshold effects
dynamic panel threshold
JEL: 
G21
O41
Document Type: 
Working Paper

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