Financial Deepening and Economic Growth in Developing Countries

John Thornton

Economia Internazionale / International Economics, 1995, vol. 48, issue 3, 423-430

Abstract: This note presents results from Granger-causality tests on 22 Asian, Latin American and Caribbean developing economies in an attempt to distinguish between competing hypotheses regarding the role of financial deepening in economic growth. The results suggest that in many cases financial deepening does not make much difference to economic growth: for eight countries no lead-lag relationship was detected and in six more economic growth led financial deepening. However, to the extent that financial deepening does make a difference, it is more likely to promote economic growth than to retard it.

Date: 1995
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