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

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. © 2019 Elsevier Inc.