Revisiting the link between financial development and industrialization: evidence from low and middle income countries

Gouthami Kothakapa, Samyukta Bhupatiraju and Rahul A. Sirohi ()
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Gouthami Kothakapa: Indian Institute of Technology Tirupati
Rahul A. Sirohi: Indian Institute of Technology Tirupati

Annals of Finance, 2021, vol. 17, issue 2, No 3, 215-230

Abstract: Abstract The paper uses a dynamic panel model to analyze the relationship between financial development and industrialization in the context of low and middle income countries between 1970 and 2014. The results indicate that the relationship between the two is non-linear. More precisely, the results indicate that financial development has a negative effect on industrial development up to a point, after which the effect turns positive. This evidence of a “U-shaped” relationship emphasizes the centrality of financial development in the industrialization process in developing economies, but it also points to the complex nature of the relationship.

Keywords: Financial development; Industrialization; Non-monotonicity; Low and middle income countries (search for similar items in EconPapers)
JEL-codes: G20 L60 O16 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10436-020-00376-y

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