 Finance–Growth Nexus and the P‐bias: Evidence from OECD CountriesEconomic Notes, 2005, vol. 34, issue 1, 113-126 Abstract: Recent studies provide new empirical evidence confirming that financial development is linked to economic growth in OECD countries. Using new dynamic panel regression techniques, these appraisals indicate that within the group of high‐income countries stock market size as a measure of financial advancement contributes significantly to overall economic activity. Applying the same advanced techniques, this paper questions this conclusion by showing that the findings of these studies seem to be not only not robust with respect to adding new observations but also likely to be plagued by a severe price bias which belittles the information content of the used financial indicator (stock market capitalization). We provide evidence that anticipative price effects (i.e. expectations of future growth, reflected in current stock prices) may be driving the statistical relationship between stock market activities and economic growth in high‐income countries to a much larger extent than recent analyses of the finance– growth link in OECD countries suggest. Date: 2005 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:ecnote:v:34:y:2005:i:1:p:113-126 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Economic Notes from Banca Monte dei Paschi di Siena SpA |
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