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The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?

Author

Listed:
  • Mr. Adolfo Barajas
  • Mr. Ralph Chami
  • Mr. Seyed Reza Yousefi

Abstract

A large theoretical and empirical literature has focused on the impact of financial deepening on economic growth throughout the world. This paper contributes to the literature by investigating whether this impact differs across regions, income levels, and types of economy. Using a rich dataset for 150 countries for the period 1975–2005, dynamic panel estimation results suggest that the beneficial effect of financial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that these differences might be driven by regulatory/supervisory characteristics and related to differences in the ability to provide widespread access to financial services.

Suggested Citation

  • Mr. Adolfo Barajas & Mr. Ralph Chami & Mr. Seyed Reza Yousefi, 2013. "The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?," IMF Working Papers 2013/130, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/130
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    More about this item

    Keywords

    WP; MENA country; private sector; banking system; dependent variable; Growth; Financial Development; Inclusive Growth; Financial Access; MENA region; credit-GDP ratio; MENA growth underperformance; x Middle East and North Africa; x GCC; GCC grouping; MENA depth; banking sector; number of observation; bank financing; oil GDP; Credit; Oil; Personal income; Stock markets; Commercial banks; Central Asia; Sub-Saharan Africa; North Africa; Middle East; East Africa;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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