Financial Intermediation and Growth: Theory and Some Cross-Country Evidence

1997 ◽  
Vol 36 (4II) ◽  
pp. 855-862
Author(s):  
Tayyeb Shabir
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Financial Intermediation ◽  
Empirical Estimates ◽  
Financial Liberalisation ◽  
Cross Country ◽  
Level Of Significance ◽  
The Relationship ◽  
Positive Effect ◽  
Theoretical Developments

Well-functioning financial markets can have a positive effect on economic growth by facilitating savings and more efficient allocation of capital. This paper characterises some of the recent theoretical developments that analyse the relationship between financial intermediation and economic growth and presents empirical estimates based on a model of the linkage between financially intermediated investment and growth for two separate groups of countries, developing and advanced. Empirical estimates for both groups suggest that financial intermediation through the efficiency of investment leads to a higher rate of growth per capita. The relevant coefficient estimates show a higher level of significance for the developing countries. This financial liberalisation in the form of deregulation and establishment and development of stock markets can be expected to lead to enhanced economic growth.

scholarly journals Financial Development And Growth In Middle Eastern Countries

2010 ◽  
Vol 9 (11) ◽  
Author(s):  
Mounther Barakat ◽  
Edward Waller
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Financial Development ◽  
Financial Intermediation ◽  
Middle Eastern ◽  
Banking System ◽  
Specific Factors ◽  
The Relationship

This paper studies the relationship between financial intermediation and economic growth in a sample of Middle Eastern countries.  The results are consistent with the hypothesis that a well-functioning banking system promotes economic growth.  Moreover, the results suggest that market-specific factors may hinder financial markets’ ability to play hypothesized roles, while enhancing the role of intermediaries.  The paper’s general conclusion is that financial development does affect economic growth.  However, market specific factors affect the magnitude and significance of this effect.  The implication is that studies should control for market-specific factors to assess the relationship between financial development and growth.

scholarly journals The Impact of Financial Intermediation on the Economy of Ghana

2021 ◽  
Vol 04 (06) ◽  
Author(s):  
David Kwashie Garr ◽  
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Financial Intermediation ◽  
Operating Cost ◽  
Bank Deposits ◽  
Interest Rate Spread ◽  
The Impact ◽  
Adf Test ◽  
The Relationship ◽  
Positive Effect

This study investigated the impact of financial intermediation on economic performance using data from sixteen (16) universal banks in Ghana. This investigation is carried out using five popular indicators of financial sector intermediation, which are deposit mobilisation, customer credit, operating cost, reserve requirement and interest rate spread. Gross Domestic Product Per Capital (GDPPC) was used as a measure of economic sector growth or performance. The causal research design was used in this analysis. The unit root was estimated using the Augmented Dickey Fuller (ADF) test. The relationship between the dependent and independent variables was also determined using basic statistics tests and multiple regression analysis. The results reveal that bank deposits have an insignificant positive effect on the economy. Bank credit, however, has a negative significant effect on economic growth. The results also suggest that operating cost has a negative effect on the economic growth but the result is not significant. However, bank reserves have a positive significant effect. Finally, the results suggest that interest rate spread has a positive effect on the economy, but the relationship is not significant.

scholarly journals The Impact of Corruption On Economic Growth: A Nonlinear Evidence

2021 ◽  
Author(s):  
Mohamed Ali Trabelsi
Keyword(s):  
Economic Growth ◽  
Data Analysis ◽  
Detrimental Effect ◽  
Panel Data Analysis ◽  
Optimal Threshold ◽  
Cross Country ◽  
The Impact ◽  
The Relationship ◽  
Positive Effect ◽  
Effect On Growth

Abstract Several cross-country studies have found that corruption slows growth, but these findings are not universally robust. Therefore, the questions to be addressed are to what extent corruption can be tolerated and at what threshold it has a detrimental effect on an economy.This article investigates the impact of corruption on economic growth by testing the hypothesis that the relationship between these two variables is nonlinear. In this article, a panel data analysis has been used to examine 65 countries over the 1987 to 2018 period. Our findings are that corruption can have a positive effect on growth. The results indicate that beyond an optimal threshold, both high and low corruption levels can decrease economic growth. Under this optimal threshold, a moderate level of corruption, defined by the point of reversal of the curve of the marginal corruption effect on growth, could have advantages for economic growth.JEL: B23, C51, D73, O47.

scholarly journals Ethnic Diversity and Growth: Revisiting the Evidence

2020 ◽  
pp. 1-43 ◽  
Author(s):  
José G. Montalvo ◽  
Marta Reynal-Querol
Keyword(s):  
Economic Growth ◽  
Ethnic Groups ◽  
Empirical Research ◽  
Ethnic Diversity ◽  
Economic Benefits ◽  
Fixed Size ◽  
Trade Off ◽  
Cross Country ◽  
The Relationship ◽  
Positive Effect

The relationship between ethnic heterogeneity and economic growth is complex. Empirical research working with cross-country data finds a negative, or statistically insignificant, relationship. However, analysis at city level finds a positive effect of diversity on wages and productivity. Generally, there is a trade-off between the economic benefits of diversity and the costs of heterogeneity. Using cells of fixed size we find that the relationship between diversity and growth is positive for small geographical areas. In the case of Africa, we argue that the explanation is the increase in trade at the boundaries between ethnic groups due to ethnic specialization.

scholarly journals Interest Groups, Public Expenditure, and Economic Growth: An Empirical Investigation

2011 ◽  
Vol 26 (3) ◽  
pp. 147-159
Author(s):  
Kim Eun Ji ◽  
Kim Sang Heon
Keyword(s):  
Economic Growth ◽  
Interest Groups ◽  
Interest Group ◽  
Negative Impact ◽  
Government Expenditure ◽  
Group Activity ◽  
Exact Nature ◽  
Cross Country ◽  
The Relationship ◽  
Positive Effect

Although many studies have dealt with the relationship between government expenditure and economic growth, none has been able to pinpoint its exact nature. Recently, however, new efforts have been made to find new factors or variables that moderate the relationship. This paper investigates a new moderating variable, interest group activity, as suggested by Kim (forthcoming). According to cross-country data analysis, the interaction term between government expenditure and interest group activity plays a significant role. Government expenditure has been estimated to have a positive effect on economic growth when interest groups are inactive, and a negative impact on growth when interest groups are active.

scholarly journals How do Poverty and Income Inequality affect Economic Growth in Developing Countries?

2021 ◽  
Vol 4 (2) ◽  
pp. 547-558
Author(s):  
Hamza Saleem ◽  
Fatima Farooq ◽  
Muhammad Aurmaghan
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Panel Data ◽  
Income Inequality ◽  
Negative Impact ◽  
Positive Impact ◽  
Development Indicators ◽  
The Relationship ◽  
Positive Effect ◽  
World Development

The major objective of this research is to examine the relationship between poverty, income inequality and economic growth from some selected developing countries. This study uses panel data for the period of 2002-2015. All the data is taken from world development indicators (WDI). To find out the results, we have used Hausman test an econometrics technique for panel data in this research. The results of the study indicate that poverty and income inequality have a negative impact on economic growth on the other hand Gross capital formation, labor force, total population and government consumption and expenditure have a positive impact on economic growth. The result tells us that changes in these variables have a significant and positive effect on the dependent variable. To achieve the goal of economic growth developing countries should reduce poverty and take meaningful steps to overcome the problem of inequality in the society which can be very helpful in achieving the goal of economic growth.

The Relationship Between Economic Growth and Innovation

2020 ◽  
pp. 358-382
Author(s):  
Samet Akça ◽  
Bilge Afşar
Keyword(s):  
Economic Growth ◽  
Panel Data ◽  
Unit Root ◽  
Oecd Countries ◽  
Patent Applications ◽  
The Relationship ◽  
Positive Effect

This chapter studies innovation and economic growth and emphasizes their relationship. In this context; innovation and economic growth outputs of 16 OECD countries between 2005 and 2015 are analyzed. GDP is considered as economic growth variable, R&D investments in GDP (%), and patent applications are considered as innovation variables. In light of these variables, panel data analyze is used. Unit root, Pedroni co-integration and FMOLS tests were applied with the order. As a result, the increase in patent applications and R&D investments was found to have a positive effect on economic growth.

scholarly journals Financial Development and Economic Growth in ASEAN-5 Countries

2018 ◽  
Vol 20 (1) ◽  
pp. 57-71 ◽  
Author(s):  
Chinnasamy Agamudai Nambhi Malarvizhi ◽  
Yashar Zeynali ◽  
Abdullah Al Mamun ◽  
Ghazali Bin Ahmad
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Economic Efficiency ◽  
Capital Accumulation ◽  
Physical Capital ◽  
Significant Positive Effect ◽  
Domestic Investment ◽  
The Relationship ◽  
Physical Capital Accumulation ◽  
Positive Effect

This article explores the relationship between financial sector development and economic growth, using a sample of ASEAN-5 countries (Malaysia, Indonesia, Singapore, Thailand and Philippines) from 1980 to 2011. More specifically, this study investigates whether higher levels of financial development (FD) are significantly and robustly correlated with faster current and future rates of economic growth, physical capital accumulation and economic efficiency improvements. Findings of this study revealed that FD has a significant positive effect on economic growth. However, the estimated models show that the influence of FD, as a determinant for economic growth of ASEAN-5 countries, is less than that of domestic investment and export.

Financial depth and economic growth - the case of Hungary, the Czech Republic and Poland

2004 ◽  
Vol 54 (3) ◽  
pp. 297-321
Author(s):  
Katalin Mérő
Keyword(s):  
Economic Growth ◽  
Czech Republic ◽  
Financial Intermediation ◽  
Bank Loans ◽  
Eastern European ◽  
Financial Deepening ◽  
The Czech Republic ◽  
Catching Up ◽  
European Economies ◽  
The Relationship

The article focuses on the relationship between economic growth and financial intermediation, with special focus on the process of catching up in three Central and Eastern European economies: Hungary, the Czech Republic and Poland (CEC-3). The depth of financial intermediation and economic growth exhibit a close, direct relationship with each other. According to recent studies the relationship is causal and the level of financial development is a good indicator of future economic growth. Examining the relationship between the two factors is especially important for these Central and Eastern European economies, where the level of financial intermediation is very low compared to that of developed countries. The lack of financial deepening is even more pronounced taking into consideration that there is a significant catching-up process in every other areas of the economy. The initial proposition here is that in order to these countries catching up, their economic growth must necessarily be accompanied by a marked financial deepening, without which long-term economic growth is impossible. It is absolutely necessary that in the future the role of bank loans in these economies increases significantly and that a period characterised by a lending boom follows. The lending boom should occur in CEC-3 is not an unequivocal sign of imprudent lending or a supply-side expansion of bank loans - on the contrary, it should be viewed as complementary to the economic development at the given economic stage.

scholarly journals INFLATION AND FINANCIAL DEPTH

2006 ◽  
Vol 10 (2) ◽  
pp. 165-182 ◽  
Author(s):  
MOHSIN S. KHAN ◽  
ABDELHAK S. SENHADJI ◽  
BRUCE D. SMITH
Keyword(s):  
Empirical Support ◽  
Threshold Level ◽  
Financial Deepening ◽  
Specific Measure ◽  
Theoretical Literature ◽  
Financial Depth ◽  
Cross Country ◽  
The Relationship ◽  
Positive Effect

There is now a substantial theoretical literature arguing that inflation impedes financial deepening. Furthermore, it has been hypothesized that the relationship is a nonlinear one, in that there is a threshold level of inflation below which inflation has a positive effect on financial depth, but above which the effect turns negative. Using a large cross-country sample, empirical support is found for the existence of such a threshold. The estimates indicate that the threshold level of inflation is generally about 3–6 percent per annum, depending on the specific measure of financial depth that is utilized.

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