What Type of Finance Matters for Growth?

This paper examines the effect of finance on long-term economic growth using Bayesian model averaging to address model uncertainty in cross-country growth regressions. The literature largely focuses on financial indicators that assess the financial depth of banks and stock markets. These indicators are examined jointly with newly developed indicators that assess the stability and efficiency of financial markets. Once the finance-growth regressions are subjected to model uncertainty,the results suggest that commonly used indicators of financial development are not robustly related to long-term growth. However, the findings from the global sample indicate that one newly developed indicator -- the efficiency of financial intermediaries -- is robustly related to long-term growth.

Bibliographic Details

Main Authors:	Hasan, Iftekhar, Horvath, Roman, Mares, Jan
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2016-04
Subjects:	FINANCIAL INNOVATION, ECONOMIC GROWTH, EQUIPMENT, TRADE CREDIT, CHECKS, ACCOUNTING, CAPITAL ACCUMULATION, FOREIGN DIRECT INVESTMENTS, FINANCING, STOCK, FOREIGN EXCHANGE MARKET, INTEREST, PUBLIC EDUCATION, DUMMY VARIABLES, GUARANTEES, ENROLLMENT, BIAS, PROPERTY RIGHTS, PRIVATE CREDIT, EXCHANGE, STOCK MARKET, HEDGE FUNDS, INTERNATIONAL FINANCIAL MARKETS, DEVELOPING COUNTRIES, BANKING SYSTEMS, BLACK MARKET, POLITICAL ECONOMY, OUTSTANDING CREDIT, BARRIER TO ENTRY, LOAN, BORROWERS, STOCK MARKET CAPITALIZATION, DUMMY VARIABLE, CAPITAL MARKET LIBERALIZATION, INTERNATIONAL BANK, FINANCIAL ACCESS INDICATORS, CREDIT BANK, INSTRUMENTS, BANK LENDING, EXTERNAL FINANCE, PRIVATE BOND, SAVINGS, LEGAL CONSTRAINTS, SECURITIES MARKET, FINANCIAL STUDIES, BOND MARKET CAPITALIZATION, EXCHANGE RATES, TRADING, OPTIONS, MONETARY FUND, GLOBALIZATION, MARKET TURNOVER, MARKETS, DEBT, CAPITAL MARKET, RETURN, OPEN ECONOMY, BUSINESS CYCLE, ECONOMIC POLICIES, LOANS, ENTERPRISES, BANK CREDIT, RULE OF LAW, FINANCIAL SYSTEM, RETURN ON ASSETS, FINANCE, BANKING SECTOR, BANKS, INFORMATION ASYMMETRY, DEBT FINANCING, EQUITY, GRANT, HUMAN CAPITAL, BOND MARKETS, GOOD, CAPITAL, LOANS TO ENTERPRISES, FINANCIAL STABILITY, LEGAL ENVIRONMENTS, PRIVATE SECTOR CREDIT, MARKET CAPITALIZATION, STUDENT, FINANCIAL CRISIS, TURNOVER, FUTURE, BANK, RETURNS, CREDIT, BOND MARKET, CAPITALIZATION, PRICE STABILITY, BANKING SECTOR DEVELOPMENT, PROPERTY, AMOUNT OF CREDIT, SHARES, FINANCIAL ACCESS, MARKET, LOAN QUALITY, DEFAULT, FOREIGN EXCHANGE, MARKET VALUE, SECURITIES, BANK ACCOUNTS, EXTERNAL CAPITAL, ECONOMIC DEVELOPMENT, MISSING MARKET, SECURITY, FINANCIAL DEVELOPMENT, BANK BRANCH, INVESTMENT, FINANCIAL INTERMEDIATION, BOND, FINANCIAL INTERMEDIARIES, LACK OF KNOWLEDGE, DOMESTIC CREDIT, FINANCIAL INSTABILITY, SHARE, HOUSEHOLDS, ECONOMIC CRISIS, FINANCIAL MARKETS, ACCESS INDICATORS, MODERN FINANCIAL SYSTEMS, REVENUE, BORROWING, FOREIGN LANGUAGE, INVESTMENTS, RISK MANAGEMENT, LENDING, CHECK, CREDIT INCREASES, SWAPS, EXCHANGE RATE, CAPITAL INVESTMENT, DIRECT INVESTMENTS, BANK BRANCHES, FINANCIAL SYSTEMS, LIABILITIES, HEDGE, INTERNATIONAL SETTLEMENTS, ASSET PRICE, STOCK MARKETS, FINANCIAL DEPTH, CORPORATE GOVERNANCE,
Online Access:	http://documents.worldbank.org/curated/en/2016/04/26241066/type-finance-matters-growth-bayesian-model-averaging-evidence https://hdl.handle.net/10986/24219
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