Does too much finance harm economic growth?

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 711

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; One, Two, and Multisector Growth Models
• Subject: Finance ; economic growth ; threshold effects ; dynamic panel threshold

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Singh, Nirvikar ; Law, Siong Hook
• Event: Veröffentlichung
• (who): University of California, Economics Department
• (where): Santa Cruz, CA
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/98628
• Last update: 10.03.2025, 11:42 AM CET