Is the Growth Effect of Financial Development Conditional on Technological Innovation?

Arshad Bhatti, M. Emranul Haque and Denise Osborn

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: This paper argues that excessive financial development in combination with high levels of technological innovation or R&D activities may lead to the former being ineffective in generating economic growth. This hypothesis is examined through a dynamic panel analysis using two measures of financial development, in conjunction with R&D expenditure, for 36 OECD and non-OECD countries. Using a range of panel data estimators, our results show that the relationship between financial development and economic growth is not straightforward; rather, it is conditional upon the level of R&D. Further, we find that a high level of R&D is associated with a weak or negative effect of financial development on economic growth.

Pages: 33 pages
Date: 2013
New Economics Papers: this item is included in nep-cse, nep-ino, nep-knm and nep-sbm
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:188

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