Financial Intermediation and Economic Growth: A Semiparametric Approach

Thanasis Stengos and Zhihong Liang ()
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Zhihong Liang: University of Guelph

A chapter in New Trends in Macroeconomics, 2005, pp 39-52 from Springer

Abstract: Summary In this paper we examine the effect of financial development on economic growth in an additive Instrumental Variable (IV)-augmented Partially Linear Regression (PLR) model using panel data of 66 countries for the period 1961-1995. Three common measures of financial development are used. Our results show that the effect of the exogenous component of a financial intermediary development index on economic growth depends greatly on the definition and measurement of that index. Financial development affects growth in a positive but non-linear way using a Liquid Liabilities index and in an almost linear way when using a Private Credit index. The effect becomes ambiguous when a Commercial-Central Bank index is used.

Keywords: Corporate Governance; Instrumental Variable; Financial Development; Trade Credit; Financial Intermediation (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-28556-4_3

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DOI: 10.1007/3-540-28556-3_3

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