Financial structure on growth and volatility

Chih-Chuan Yeh, Ho-Chuan Huang () and Pei-Chien Lin

Economic Modelling, 2013, vol. 35, issue C, 391-400

Abstract: By applying the pooled mean group estimator to a large panel up to 40 countries over the 1960–2009 period, this study finds that financial structure is significantly cointegrated to both economic growth and its volatility. In particular, the relationship is positive in nature, suggesting that more market-based countries enjoy faster economic growth but suffer more from economic fluctuations in the long run. Accordingly, in sharp contrast to the existing evidences, we conclude that the architecture of an economy's financial system matters for real sector performance. Moreover, the findings are robust to a variety of sensitivity checks, including the problem of endogeneity, the use of different financial structure (and growth volatility) indicators, the inclusion of extra growth (volatility) determinants, and the control of cross-sectional dependence in the panel data.

Keywords: Financial structure; Economic growth; Growth volatility; Pooled mean group estimator (search for similar items in EconPapers)
JEL-codes: C23 G10 G20 O16 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:391-400

DOI: 10.1016/j.econmod.2013.07.034

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