What Type of Finance Matters for Growth? Bayesian Model Averaging Evidence

59 Pages Posted: 20 Apr 2016

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Roman Horvath

Charles University in Prague; IOS Regensburg; Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG); University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE)

Jan Mares

Czech Republic - Ministry of Finance of the Czech Republic

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 2016

Abstract

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.

Keywords: Financial Economics, Finance and Development

Suggested Citation

Hasan, Iftekhar and Horvath, Roman and Mares, Jan, What Type of Finance Matters for Growth? Bayesian Model Averaging Evidence (April 18, 2016). World Bank Policy Research Working Paper No. 7645, Available at SSRN: https://ssrn.com/abstract=2766759

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Roman Horvath

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

IOS Regensburg

Landshuter Str. 4
Regensburg, 93047
Germany

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG)

250, rue Albert Einstein
Valbonne, 06560
France

University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE)

Lyon
France

Jan Mares

Czech Republic - Ministry of Finance of the Czech Republic ( email )

Letenska 15
118 10 Prague 1
Prague
Czech Republic

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