Economic Growth and Financial System

Hector Gonzalez Padilla

Ensayos Económicos, 2012, vol. 1, issue 65-66, 61-74

Abstract: This document provides empirical evidence about the role of the financial system on the growth of developing economies. In order to prove that relationship a panel data regression using a sample of 26 developing economies for the period 1961- 2005 is estimated. Instrumental variables methodology is used for econometric estimations. A positive relationship between financial development and economic growth was found. The estimates suggest that the financial system contributes to increase economic growth by improving investment allocation. Therefore, a properly functioning financial system is a necessary but not a sufficient condition to promote growth in developing economies.

Keywords: economic development; economic growth; financial development; financial intermediation (search for similar items in EconPapers)
JEL-codes: G2 O1 O4 (search for similar items in EconPapers)
Date: 2012
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