Revisiting the finance-growth nexus: Global evidence

Abd Rahman Razak () and Wahyoe Soedarmono
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Abd Rahman Razak: Department of Economics, Faculty of Economics and Business, Hasanuddin University, Indonesia

Economics Bulletin, 2023, vol. 43, issue 3, 1214 - 1224

Abstract: Using a sample of 218 countries from 1960 to 2017, we document that higher bank credit is associated with a decline in economic growth one year ahead. However, higher bank credit can also boost economic growth after three years. In the meantime, stock market development is positively linked to economic growth after one year, but stock market development also deteriorates economic growth after two years. All these results are more pronounced for emerging markets. For emerging markets, stock market development is therefore essential for economic growth in the shorter term, while banking is particularly important to boost economic growth in the longer term. For high-income countries, the link between finance and growth remains ambiguous.

Keywords: Financial development; inter-temporal effects; economic growth (search for similar items in EconPapers)
JEL-codes: G2 O1 (search for similar items in EconPapers)
Date: 2023-09-30
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