Finance and Growth: Empirical Evidence from Developing Countries, 1960-1990

Mohammed Trabelsi

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: This paper examines the empirical relationship between financial intermediation and economic growth using cross-country and panel data regressions for 69 developing countries for the 1960-1990 period. The main results are : (i) financial development is a significant determinant of economic growth, as it has been shown in cross-sectional regressions; (ii) financial markets cease to exert any effect on real activity when the temporal dimension is introduced in the regressions. The paradox may be explained, in the case of developing countries, by the lack of an entrepreneurial private sector capable to transform the available funds into profitable projects; (iii) the effect of financial development on economic growth is channeled mainly through an increase in investment efficiency.

Keywords: financial intermediation; economic growth; cross-section; nel data (search for similar items in EconPapers)
Pages: 29 pages
Date: 2002
New Economics Papers: this item is included in nep-mfd
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:2002-13

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