 The Econometrics of Finance and GrowthChapter 25 in Palgrave Handbook of Econometrics, 2009, pp 1180-1209 from Palgrave Macmillan Abstract: Abstract This chapter reviews different econometric methodologies to assess the relationship between financial development and growth. It illustrates the identification problem, which is at the center of the finance and growth literature, using the example of a simple ordinary least squares estimation. It discusses cross-sectional and panel instrumental variable approaches to overcome the identification problem. It presents the time series approach, which focuses on the forecast capacity of financial development for future growth rates, and differences-in-differences techniques that try to overcome the identification problem by assessing the differential effect of financial sector development across states with different policies or across industries with different needs for external finance. Finally, it discusses firm- and household-level approaches that allow analysts to dig deeper into the channels and mechanisms through which financial development enhances growth and welfare, but pose their own methodological challenges. Keywords: Gross Domestic Product; Ordinary Little Square; Unit Root; Instrumental Variable; Granger Causality (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-24440-5_25 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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