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Financial Development, Economic Performance and Democracy

Zhenxiong Li and Hilary Ingham

No 291296033, Working Papers from Lancaster University Management School, Economics Department

Abstract: This paper investigates the long-term effect of financial development on economic growth using annual data for 67 countries over the period 1971 to 2007. Both autoregressive distributed lag (ARDL) and cross-sectionally augmented autoregressive distributed lag (CS-ARDL) models are applied to count for crosscountry heterogeneity and error cross-country dependence. The results uphold a positive and significant effect of financial development on long-run per capita output. There is also some evidence of a non-linear relationship between financial development and growth. However, the analysis also reveals that the results derive primarily from non-democratic countries.

Keywords: Economic growth; Financial development; Democracy (search for similar items in EconPapers)
JEL-codes: O16 O43 P16 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-fdg and nep-gro
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