Institutional quality thresholds and the finance – growth nexus

Citation

Law, Siong Hook and Wan Ngah, Wan Azman Saini and Ibrahim, Mansor H. (2013) Institutional quality thresholds and the finance – growth nexus. Journal of Banking & Finance, 37 (12). pp. 5373-5381. ISSN 0378-4266

Abstract

Using an innovative threshold estimation technique, this study examines whether the growth effect of financial development in countries with distinct levels of institutional development differs. The results demonstrate that there is a threshold effect in the finance-growth relationship. Specifically, we found that the impact of finance on growth is positive and significant only after a certain threshold level of institutional development has been attained. Until then, the effect of finance on growth is nonexistent. This finding suggests that the financial development-growth nexus is contingent on the level of institutional quality, thus supporting the idea that better finance (i.e., financial markets embedded within a sound institutional framework) is potent in delivering long-run economic development.

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Additional Metadata

Item Type:	Article
Divisions:	Faculty of Economics and Management
DOI Number:	https://doi.org/10.1016/j.jbankfin.2013.03.011
Publisher:	Elsevier
Keywords:	Finance; Economic growth; Institutions; Threshold effect
Depositing User:	Nabilah Mustapa
Date Deposited:	27 Apr 2015 03:08
Last Modified:	01 Oct 2015 03:44
Altmetrics:	http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1016/j.jbankfin.2013.03.011
URI:	http://psasir.upm.edu.my/id/eprint/28303
Statistic Details:	View Download Statistic

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