The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?

By Adolfo Barajas, Ralph Chami, Reza Yousefi

May 29, 2013

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Adolfo Barajas, Ralph Chami, and Reza Yousefi. The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?, (USA: International Monetary Fund, 2013) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

A large theoretical and empirical literature has focused on the impact of financial deepening on economic growth throughout the world. This paper contributes to the literature by investigating whether this impact differs across regions, income levels, and types of economy. Using a rich dataset for 150 countries for the period 1975–2005, dynamic panel estimation results suggest that the beneficial effect of financial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that these differences might be driven by regulatory/supervisory characteristics and related to differences in the ability to provide widespread access to financial services.

Subject: Banking, Commercial banks, Commodities, Credit, Financial institutions, Financial markets, Money, National accounts, Oil, Personal income, Stock markets

Keywords: Bank financing, Banking sector, Banking system, Central Asia, Commercial banks, Credit, Credit-GDP ratio, Dependent variable, East Africa, Financial Access, Financial Development, GCC grouping, Growth, Inclusive Growth, MENA country, MENA depth, MENA growth underperformance, MENA region, Middle East, North Africa, Number of observation, Oil, Oil GDP, Personal income, Private sector, Stock markets, Sub-Saharan Africa, WP, X GCC, X Middle East and North Africa

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/130
Stock No:

WPIEA2013130
ISBN:

9781484372104
ISSN:

1018-5941

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