 Too Much Finance?Enrico Berkes, Ugo Panizza and Jean-Louis Arcand No 2012/161, IMF Working Papers from International Monetary Fund Abstract: 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. Keywords: WP; dummy variable; positive correlation; economic development; mis-specification error; Financial development; Economic Growth; Stock Markets; Banks; Finance-growth nexus; credit to the private sector; point estimate; System GMM; decreasing returns; Credit; Financial sector; Bank supervision; Financial sector development; Banking crises (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2012/161 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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