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Author/Editor:
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Arcand, Jean-Louis ; Berkes, Enrico ; Panizza, Ugo
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Publication Date:
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June 01, 2012
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Electronic Access:
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Free Full text
(PDF file size is 921KB).
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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
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Summary:
This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We use different empirical approaches to show that there can indeed be "too much" finance. In particular, our results suggest that finance starts having a negative effect on output growth when credit to the private sector reaches 100% of GDP. We show that our results are consistent with the "vanishing effect" of financial development and that they are not driven by output volatility, banking crises, low institutional quality, or by differences in bank regulation and supervision.
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Order a print copy
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Series:
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Working Paper No. 12/161
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Subject(s):
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Cross country analysis | Development | Economic growth | Financial sector | Financial systems
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Author's Keyword(s):
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Financial development | Economic Growth | Stock Markets | Banks | Finance-growth nexus |
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