The Effect of Financial Deepening on Economic Growth, Inequality, and Poverty: Evidence from 73 Countries

Sugiyanto Catur () and Yolanda Zefania ()
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Sugiyanto Catur: Professor Faculty of Economics and Business, Universitas Gadjah Mada
Yolanda Zefania: S.E. Alumni Faculty of Economics and Business, Universitas Gadjah Mada

South East European Journal of Economics and Business, 2020, vol. 15, issue 2, 15-27

Abstract: This study aims to analyze the effect of financial deepening on economic growth, income inequality, and poverty rates in 73 countries during the period 1991–2015. Panel data regression and the interaction of dummy variables are used to measure the effect. The results indicate that financial deepening has positive effects on economic growth, but negative effects on income inequality and poverty rates; has significant effect on economic growth in advanced economies (AEs) and significant effect on income equality and poverty rates in emerging markets and developing economies (EMDEs). These findings show that countries have to be selective in developing their financial sectors as it either can have positive or negative effect.

Keywords: financial deepening; income inequality; poverty; panel data (search for similar items in EconPapers)
JEL-codes: C23 I30 O16 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:15:y:2020:i:2:p:15-27:n:2

DOI: 10.2478/jeb-2020-0012

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