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Which Way to Go Now? Financing Economic Growth in the Sustainable Development Era

Author

Listed:
  • SUDIP RANJAN BASU

    (United Nations Economic and Social Commission for Asia and the Pacific (Pacific Office), United Nations, Suva, Fiji)

  • MONICA DAS

    (Skidmore College, United States)

Abstract

Our paper uses a novel methodology to reexamine the relationship between financial development and economic growth in the era of sustainable development. Our empirical procedure deals with both functional-form misspecification bias as well as bias from endogenous regressors. It also provides an estimate of the growth-finance relationship for every country-year observation, allowing us to examine the relationship of interest for various country groups, using a global sample of 133 countries during 1960–2015. Our results indicate that countries with weak institutions and a smaller-than-average banking sector will reap more benefits from bank-based financial systems. The impact of financial development on economic performance has enormous policy implications for international institutions that provide policy support to countries in their pursuit of achieving the 2030 Agenda for Sustainable Development.

Suggested Citation

  • Sudip Ranjan Basu & Monica Das, 2023. "Which Way to Go Now? Financing Economic Growth in the Sustainable Development Era," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 40(02), pages 177-209, September.
    • Handle: RePEc:wsi:adrxxx:v:40:y:2023:i:02:n:s0116110523500142
    DOI: 10.1142/S0116110523500142
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    More about this item

    Keywords

    economic growth; financial development; nonlinearities; nonparametric methods;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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