Economic growth and financial depth
Subtitle: is the relationship extinct already?
By: Peter L. Rousseau and Paul Wachtel.
Contributors: Wachtel, Paul, 1945-; World Institute for Development Economics Research.
Series: WIDER discussion paper -- no. 2005/10
Publisher: United Nations University, World Institute for Development Economics Research
Published: 2005
Place of publication: Helsinki
Language: eng
Number of pages: 20
Subjects: Financial institutions -- Econometric models; Economic development -- Econometric models
Genres: Econometric models
Description: Although the finance-growth nexus has become firmly entrenched in the empirical literature, studies that question the strength of the empirical results have appeared and seem to have become more frequent as well. In this paper we re-examine the core cross-country panel results that established the relationship between financial depth and growth rates.  We examine the sensitivity of the core result to changes in time period and variation in the sample of countries included.    We find that the finance-growth relationship in [i.e. is] not as strong with more recent data as it was in the original studies with data for the period from 1960 to 1989. We offer two possible explanations.  first, financial depth may have had greater value as a shock absorber in the 1970s and 1980s, decades characterized by worldwide nominal shocks. Second, the spread of financial liberalization in the 1980s may have led to increasing financial depth in countries that lacked the legal or regulatory infrastructure to successfully exploit financial development" -- Abstract
Notes: "December 2005."

Includes bibliographical references (p. 19-20).

Also available from the Internet at www.wider.unu.edu