Convergence in Financial Development and Growth

Zhiheng He () and Yang You ()
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Zhiheng He: Tsinghua University
Yang You: The University of Hong Kong

Open Economies Review, 2024, vol. 35, issue 4, No 5, 779-799

Abstract: Abstract We evaluate the cross-country convergence of financial development and its relationship with GDP growth. Financial inclusion variables have been widely converged across countries, and the catch-up effect of countries with poor financial coverage mainly drives the convergence. In contrast, financial development measures — including domestic credit, liability, mutual fund size, and stock market capitalization — have diverged since 1985 despite the absolute convergence in GDP and financial inclusion. The GDP growth rates strongly correlate with the change in financial development but not the improvement in financial inclusion.

Keywords: Economic convergence; Financial inclusion; Divergence in finance (search for similar items in EconPapers)
JEL-codes: G20 O11 O43 O47 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11079-024-09767-4

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