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Financial Structure and Economic Growth

Kul Luintel (), Mosahid Khan, Philip Arestis and Konstantinos Theodoridis ()

No E2008/3, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: Recent empirical work on financial structure and economic growth analyzes multicountry dataset in panel and/or cross-section frameworks and conclude that financial structure is irrelevant. We highlight their shortcomings and re-examine this issue utilizing a time series and a dynamic heterogeneous panel methods. Our sample consists of fourteen countries. Tests reveal that cross-country data cannot be pooled. Financial structure significantly explains output levels in most countries. The results are rigorously scrutinized through bootstrap exercises and they are robust to extensive sensitivity tests. We also test for several hypotheses about the prospective role of financial structure and financial development on economic growth.

Keywords: Financial Structure; Economic Growth; Co-integration; Bootstrap; Dynamic Heterogeneous Panels (search for similar items in EconPapers)
JEL-codes: O16 G18 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-dev, nep-fdg and nep-fmk
Date: 2008-01
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Published in Journal of Development Economics , 86 (2008) 181-200

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