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Revisiting the impact of financial depth on growth: A semi-parametric approach

Publication date: Available online 14 October 2019

Source: Finance Research Letters

Author(s): Michael L. Polemis, Thanasis Stengos, Nickolaos G. Tzeremes

Abstract

We investigate the impact of financial depth on economic growth by using a flexible semi parametric model allowing for fixed effects along the lines of Baltagi and Li (2002). The results are robust under the two finance measures (domestic credit to private sector and broad money) and shed new light on the finance-growth nexus. We argue that this relationship appears to be very weak and tentative even though mildly nonlinear, regardless of the specification of the parametric part of the model.


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