## 2 Literature Review
### Financial Development and Economic Growth  
The relationship between financial development and economic growth has received particular attention from applied studies, remaining an important issue of debate. The theoretical underpinnings of this relationship can be traced back to the work of [29]. The alternative causality flows between financial development and growth were denominated by [30] as the \"supply-leading\" and \"demand-following\" hypothesis. The former hypothesis suggests a causal relationship running from financial development to economic growth, with financial institutions influencing economic growth. On the other hand, the \"demand-following\" hypothesis indicates the existence of the opposite link, from economic growth to financial development. These theoretical debates highlight the lack of a consensus on the effect of financial development in the economic growth process, as well as the direction of causal inference between these macroeconomic variables. Some economists argued that financial systems promote economic growth with a significant role, in line with the \"supply-leading\" hypothesis. Refs. [31; 32] emphasized the positive role of financial systems in economic growth. For applied panel data studies, ref. [25], using data on 80 countries over the 1960-1989 period, showed that initial levels of financial development are relevant in explaining subsequent growth. Ref. [33] analyzed a dataset of about 100 countries during 1960-1985, concluding that financial development fosters growth performance. Ref. [34] analyzed the empirical relation between the index of stock market development and economic growth in the long-run for 41 countries in the years 1976-1993. They included a variety of macroeconomic indicators (the ratio of government consumption expenditures to GDP, the inflation rate, and the black market exchange rate premium). The results of IVs regressions show a strong association between the two variables. Ref. [7] used a panel dataset of 74 countries over the period of 1960-1995 with GMM techniques, showing that reforms that boost financial intermediary development are able to consequently stimulate economic growth. Ref. [35] studied data for Korea during 1971-2002, providing empirical support in favor of the \"supply-leading\" hypothesis. Refs. [36; 37; 38] provided further support to this hypothesis. \begin{table}
\begin{tabular}{c c c c c} \hline \hline
**Author(s)** & **Country** & **Study Period** & **Empirical Strategy** & **Direction of Relationships** \\ \hline [PERSON] et al. (1999) & China & 1995 & Cross section & CA \(\rightarrow\) [PERSON] et al. (1990) & China & 1987 & Cross section & CA \(\rightarrow\) [PERSON] (2004) & Tunisia & 1995 & Cross section & CA \(\rightarrow\) [PERSON] (1997) & India & 1981–1982 & Cross section & [PERSON] [PERSON] (2004) & Poland & 2000 & Cross section & \\ [PERSON] et al. (2014) & Ireland & 1997–2010 & Panel data & \\ [PERSON] (2008) & Peru & 1997 and 2003 & Panel data & CA \(\rightarrow\) [PERSON] et al. (2014) & Rwanda & 2011 & Cross section & CA \(\rightarrow\) [PERSON] et al. (2015) & USA & 1991–2010 & Panel data & \\ [PERSON] et al. (2012) & China & 2008 & Cross section & CA \(\rightarrow\) [PERSON] et al. (2017) & Pakistan & 1960–2015 & Time series & \\ \hline \hline \end{tabular} Notes: CA: Credit Access; P: Productivity. Source: our elaborations.  
\end{table} 
Table 1: Summary of literature between credit access and productivity. While [5] concluded that the development of the financial sector facilitates the growth of the corporate sector, ref. [39], using data on firms and bank branches of 18 emerging European economies, illustrated that credit access has a positive effect on local economic growth. On the other hand, refs. [40; 41] stated that financial development has a negligible and over-stressed effect on economic growth, so that the engines of growth should be sought elsewhere. Refs. [42; 43; 44] casted doubt on the importance of the financial system in promoting economic growth. Additionally, refs.