The econometrics of finance and growth, Vol. 1 of 1

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Home > Data & Research > Author Profile > Report Details

The econometrics of finance and growth

Author:	Beck, Thorsten;	Collection Title:	Policy Research working paper ; no. WPS 4608
Country:	World;	Date Stored:	2008/04/24
Document Date:	2008/04/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	The World Region
Report Number:	WPS4608	SubTopics:	Achieving Shared Growth; Access to Finance; Economic Theory & Research; Debt Markets; Statistical & Mathematical Sciences
Volume No:	1 of 1

Summary: This paper reviews different econometric methodologies to assess the relationship between financial development and growth. It illustrates the identification problem, which is at the center of the finance and growth literature, using the example of a simple Ordinary Least Squares estimation. It discusses cross-sectional and panel instrumental variable approaches to overcome the identification problem. It presents the time-series approach, which focuses on the forecast capacity of financial development for future growth rates, and differences-in-differences techniques that try to overcome the identification problem by assessing the differential effect of financial sector development across states with different policies or across industries with different needs for external finance. Finally, it discusses firm-level and household approaches that allow analysts to dig deeper into the channels and mechanisms through which financial development enhances growth and welfare, but pose their own methodological challenges.


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