Summary
In this paper we examine the effect of financial development on economic growth in an additive Instrumental Variable (IV)-augmented Partially Linear Regression (PLR) model using panel data of 66 countries for the period 1961-1995. Three common measures of financial development are used. Our results show that the effect of the exogenous component of a financial intermediary development index on economic growth depends greatly on the definition and measurement of that index. Financial development affects growth in a positive but non-linear way using a Liquid Liabilities index and in an almost linear way when using a Private Credit index. The effect becomes ambiguous when a Commercial-Central Bank index is used.
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Stengos, T., Liang, Z. (2005). Financial Intermediation and Economic Growth: A Semiparametric Approach. In: Diebolt, C., Kyrtsou, C. (eds) New Trends in Macroeconomics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-28556-3_3
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DOI: https://doi.org/10.1007/3-540-28556-3_3
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-21448-9
Online ISBN: 978-3-540-28556-4
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