Financial Development and Economic Growth - a New Empirical Analysis

Dresden Discussion Papers in Economics No. 5/99

17 Pages Posted: 6 Feb 2001

Date Written: 1999

Abstract

The paper describes tests of hypotheses from economic history concerning the significance of financial development as a determinant of economic growth. It goes beyond the existing studies in drawing on a large panel data set covering 93 countries from 1970-90 and includes a new proxy for the resource input into the financial system. Moreover, interaction effects between financial development and catching-up as well as education are considered. Finally, to clarify causal relationships, a two-wave path model is estimated. It is shown that during the 1970s and 1980s finance was a significant and predominantly supply-leading determinant of growth.

Keywords: finance, development, growth, causality

JEL Classification: G20, N20, 016

Suggested Citation

Graff, Michael, Financial Development and Economic Growth - a New Empirical Analysis (1999). Dresden Discussion Papers in Economics No. 5/99, Available at SSRN: https://ssrn.com/abstract=258928 or http://dx.doi.org/10.2139/ssrn.258928

Michael Graff (Contact Author)

ETH Zurich ( email )

KOF Swiss Economic Institute
Leonhardstrasse 21
CH-8092 Zurich, 8092
Switzerland

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