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

Author/Editor: Adolfo Barajas ; Ralph Chami ; Reza Yousefi
Publication Date: May 29, 2013
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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
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.
Series: Working Paper No. 13/130
Subject(s): Economic growth | Middle East | North Africa | Latin America | Caribbean | Oil exporting countries | Nonoil developing countries | Low-income developing countries | Banking sector | Stock markets | Access to capital markets | Economic models | Time series

Publication Date: May 29, 2013
ISBN/ISSN: 9781484372104/1018-5941 Format: Paper
Stock No: WPIEA2013130 Pages: 47
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