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Financial Development On Growth Convergence

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  • Dong‐Hyeon Kim
  • Ho‐Chuan Huang
  • Shu‐Chin Lin
  • Chih‐Chuan Yeh

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.

Suggested Citation

  • Dong‐Hyeon Kim & Ho‐Chuan Huang & Shu‐Chin Lin & Chih‐Chuan Yeh, 2010. "Financial Development On Growth Convergence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(4), pages 493-514, September.
    • Handle: RePEc:bla:scotjp:v:57:y:2010:i:4:p:493-514
    DOI: 10.1111/j.1467-9485.2010.00528.x
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