Thresholds in Financial Development and Economic Growth

Jean-Claude Berthélemy and Aristomene Varoudakis

The Manchester School of Economic & Social Studies, 1995, vol. 63, issue 0, 70-84

Abstract: The purpose of this paper is to assess the existence of threshold effects in economic growth, linked to the development of the banking sector. We, first, discuss the possibility of multiple steady state equilibria doe to reciprocal externalities between the banking sector and the real sector. To check the existence of multiple steady states, associated with both financial development and educational development, we perform stability tests on a 'Barro-type' conditional [beta]-convergence equation. Optimal splits of our ninety-one-country sample are then estimated through a maximum likelihood method. We thus define 'convergence clubs', characterized by educational and banking sector development indicators, which exhibit specific behavior as regards the factors determining long-run growth. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:63:y:1995:i:0:p:70-84

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