Financial development on growth convergence

Dong-Hyeon Kim, Ho Chuan Huang, Shu Chin Lin, Chih Chuan Yeh

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Abstract

This paper investigates whether the impacts of financial development on growth convergence vary with the stage of real development. We implement this analysis through the instrumental variable threshold regression approach proposed by Caner and Hansen. Our empirical evidence shows that financial intermediary development leads to long-run convergence in growth of both economic activity and productivity. Moreover, such convergence-enhancing effects of financial intermediation are stronger for less-developed countries than for the more industrialized. In addition, the data reveal that stock market development assists growth convergence only in low-income countries.

Original languageEnglish
Pages (from-to)493-514
Number of pages22
JournalScottish Journal of Political Economy
Volume57
Issue number4
DOIs
Publication statusPublished - 2010 Sep 1
Externally publishedYes

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ASJC Scopus subject areas

  • Economics and Econometrics
  • Sociology and Political Science

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