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

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...

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Main Authors:	Hasan, Iftekhar, Horvath, Roman, Mares, Jan
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
Subjects:	FINANCIAL INNOVATION ECONOMIC GROWTH EQUIPMENT TRADE CREDIT CHECKS ACCOUNTING CAPITAL ACCUMULATION FOREIGN DIRECT INVESTMENTS FINANCING STOCK FOREIGN EXCHANGE MARKET INTEREST PUBLIC EDUCATION DUMMY VARIABLES GUARANTEES ENROLLMENT BIAS PROPERTY RIGHTS PRIVATE CREDIT EXCHANGE STOCK MARKET HEDGE FUNDS INTERNATIONAL FINANCIAL MARKETS DEVELOPING COUNTRIES BANKING SYSTEMS BLACK MARKET POLITICAL ECONOMY OUTSTANDING CREDIT BARRIER TO ENTRY LOAN BORROWERS STOCK MARKET CAPITALIZATION DUMMY VARIABLE CAPITAL MARKET LIBERALIZATION INTERNATIONAL BANK FINANCIAL ACCESS INDICATORS CREDIT BANK INSTRUMENTS BANK LENDING EXTERNAL FINANCE PRIVATE BOND SAVINGS LEGAL CONSTRAINTS SECURITIES MARKET FINANCIAL STUDIES BOND MARKET CAPITALIZATION EXCHANGE RATES TRADING OPTIONS MONETARY FUND GLOBALIZATION MARKET TURNOVER MARKETS DEBT CAPITAL MARKET RETURN OPEN ECONOMY BUSINESS CYCLE ECONOMIC POLICIES LOANS ENTERPRISES BANK CREDIT RULE OF LAW FINANCIAL SYSTEM RETURN ON ASSETS FINANCE BANKING SECTOR BANKS INFORMATION ASYMMETRY DEBT FINANCING EQUITY GRANT HUMAN CAPITAL BOND MARKETS GOOD CAPITAL LOANS TO ENTERPRISES FINANCIAL STABILITY LEGAL ENVIRONMENTS PRIVATE SECTOR CREDIT MARKET CAPITALIZATION STUDENT FINANCIAL CRISIS TURNOVER FUTURE BANK RETURNS CREDIT BOND MARKET CAPITALIZATION PRICE STABILITY BANKING SECTOR DEVELOPMENT PROPERTY AMOUNT OF CREDIT SHARES FINANCIAL ACCESS MARKET LOAN QUALITY DEFAULT FOREIGN EXCHANGE MARKET VALUE SECURITIES BANK ACCOUNTS EXTERNAL CAPITAL ECONOMIC DEVELOPMENT MISSING MARKET SECURITY FINANCIAL DEVELOPMENT BANK BRANCH INVESTMENT FINANCIAL INTERMEDIATION BOND FINANCIAL INTERMEDIARIES LACK OF KNOWLEDGE DOMESTIC CREDIT FINANCIAL INSTABILITY SHARE HOUSEHOLDS ECONOMIC CRISIS FINANCIAL MARKETS ACCESS INDICATORS MODERN FINANCIAL SYSTEMS REVENUE BORROWING FOREIGN LANGUAGE INVESTMENTS RISK MANAGEMENT LENDING CHECK CREDIT INCREASES SWAPS EXCHANGE RATE CAPITAL INVESTMENT DIRECT INVESTMENTS BANK BRANCHES FINANCIAL SYSTEMS LIABILITIES HEDGE INTERNATIONAL SETTLEMENTS ASSET PRICE STOCK MARKETS FINANCIAL DEPTH CORPORATE GOVERNANCE
Online Access:	http://documents.worldbank.org/curated/en/2016/04/26241066/type-finance-matters-growth-bayesian-model-averaging-evidence http://hdl.handle.net/10986/24219

id	okr-10986-24219
recordtype	oai_dc
spelling	okr-10986-242192021-04-23T14:04:20Z What Type of Finance Matters for Growth? : Bayesian Model Averaging Evidence Hasan, Iftekhar Horvath, Roman Mares, Jan FINANCIAL INNOVATION ECONOMIC GROWTH EQUIPMENT TRADE CREDIT CHECKS ACCOUNTING CAPITAL ACCUMULATION FOREIGN DIRECT INVESTMENTS FINANCING STOCK FOREIGN EXCHANGE MARKET INTEREST PUBLIC EDUCATION DUMMY VARIABLES GUARANTEES ENROLLMENT BIAS PROPERTY RIGHTS PRIVATE CREDIT EXCHANGE STOCK MARKET HEDGE FUNDS INTERNATIONAL FINANCIAL MARKETS DEVELOPING COUNTRIES BANKING SYSTEMS BLACK MARKET POLITICAL ECONOMY OUTSTANDING CREDIT BARRIER TO ENTRY LOAN BORROWERS STOCK MARKET CAPITALIZATION DUMMY VARIABLE CAPITAL MARKET LIBERALIZATION INTERNATIONAL BANK FINANCIAL ACCESS INDICATORS CREDIT BANK INSTRUMENTS BANK LENDING EXTERNAL FINANCE PRIVATE BOND SAVINGS LEGAL CONSTRAINTS SECURITIES MARKET FINANCIAL STUDIES BOND MARKET CAPITALIZATION EXCHANGE RATES TRADING OPTIONS MONETARY FUND GLOBALIZATION MARKET TURNOVER MARKETS DEBT CAPITAL MARKET RETURN OPEN ECONOMY BUSINESS CYCLE ECONOMIC POLICIES LOANS ENTERPRISES BANK CREDIT RULE OF LAW FINANCIAL SYSTEM RETURN ON ASSETS FINANCE BANKING SECTOR BANKS INFORMATION ASYMMETRY DEBT FINANCING EQUITY GRANT HUMAN CAPITAL BOND MARKETS GOOD CAPITAL LOANS TO ENTERPRISES FINANCIAL STABILITY LEGAL ENVIRONMENTS PRIVATE SECTOR CREDIT MARKET CAPITALIZATION STUDENT FINANCIAL CRISIS TURNOVER FUTURE BANK RETURNS CREDIT BOND MARKET CAPITALIZATION PRICE STABILITY BANKING SECTOR DEVELOPMENT PROPERTY AMOUNT OF CREDIT SHARES FINANCIAL ACCESS MARKET LOAN QUALITY DEFAULT FOREIGN EXCHANGE MARKET VALUE SECURITIES BANK ACCOUNTS EXTERNAL CAPITAL ECONOMIC DEVELOPMENT MISSING MARKET SECURITY FINANCIAL DEVELOPMENT BANK BRANCH INVESTMENT FINANCIAL INTERMEDIATION BOND FINANCIAL INTERMEDIARIES LACK OF KNOWLEDGE DOMESTIC CREDIT FINANCIAL INSTABILITY SHARE HOUSEHOLDS ECONOMIC CRISIS FINANCIAL MARKETS ACCESS INDICATORS MODERN FINANCIAL SYSTEMS REVENUE BORROWING FOREIGN LANGUAGE INVESTMENTS RISK MANAGEMENT LENDING CHECK CREDIT INCREASES SWAPS EXCHANGE RATE CAPITAL INVESTMENT DIRECT INVESTMENTS BANK BRANCHES FINANCIAL SYSTEMS LIABILITIES HEDGE INTERNATIONAL SETTLEMENTS ASSET PRICE STOCK MARKETS FINANCIAL DEPTH CORPORATE GOVERNANCE 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. 2016-05-04T19:27:19Z 2016-05-04T19:27:19Z 2016-04 Working Paper http://documents.worldbank.org/curated/en/2016/04/26241066/type-finance-matters-growth-bayesian-model-averaging-evidence http://hdl.handle.net/10986/24219 English en_US Policy Research Working Paper;No. 7645 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	FINANCIAL INNOVATION ECONOMIC GROWTH EQUIPMENT TRADE CREDIT CHECKS ACCOUNTING CAPITAL ACCUMULATION FOREIGN DIRECT INVESTMENTS FINANCING STOCK FOREIGN EXCHANGE MARKET INTEREST PUBLIC EDUCATION DUMMY VARIABLES GUARANTEES ENROLLMENT BIAS PROPERTY RIGHTS PRIVATE CREDIT EXCHANGE STOCK MARKET HEDGE FUNDS INTERNATIONAL FINANCIAL MARKETS DEVELOPING COUNTRIES BANKING SYSTEMS BLACK MARKET POLITICAL ECONOMY OUTSTANDING CREDIT BARRIER TO ENTRY LOAN BORROWERS STOCK MARKET CAPITALIZATION DUMMY VARIABLE CAPITAL MARKET LIBERALIZATION INTERNATIONAL BANK FINANCIAL ACCESS INDICATORS CREDIT BANK INSTRUMENTS BANK LENDING EXTERNAL FINANCE PRIVATE BOND SAVINGS LEGAL CONSTRAINTS SECURITIES MARKET FINANCIAL STUDIES BOND MARKET CAPITALIZATION EXCHANGE RATES TRADING OPTIONS MONETARY FUND GLOBALIZATION MARKET TURNOVER MARKETS DEBT CAPITAL MARKET RETURN OPEN ECONOMY BUSINESS CYCLE ECONOMIC POLICIES LOANS ENTERPRISES BANK CREDIT RULE OF LAW FINANCIAL SYSTEM RETURN ON ASSETS FINANCE BANKING SECTOR BANKS INFORMATION ASYMMETRY DEBT FINANCING EQUITY GRANT HUMAN CAPITAL BOND MARKETS GOOD CAPITAL LOANS TO ENTERPRISES FINANCIAL STABILITY LEGAL ENVIRONMENTS PRIVATE SECTOR CREDIT MARKET CAPITALIZATION STUDENT FINANCIAL CRISIS TURNOVER FUTURE BANK RETURNS CREDIT BOND MARKET CAPITALIZATION PRICE STABILITY BANKING SECTOR DEVELOPMENT PROPERTY AMOUNT OF CREDIT SHARES FINANCIAL ACCESS MARKET LOAN QUALITY DEFAULT FOREIGN EXCHANGE MARKET VALUE SECURITIES BANK ACCOUNTS EXTERNAL CAPITAL ECONOMIC DEVELOPMENT MISSING MARKET SECURITY FINANCIAL DEVELOPMENT BANK BRANCH INVESTMENT FINANCIAL INTERMEDIATION BOND FINANCIAL INTERMEDIARIES LACK OF KNOWLEDGE DOMESTIC CREDIT FINANCIAL INSTABILITY SHARE HOUSEHOLDS ECONOMIC CRISIS FINANCIAL MARKETS ACCESS INDICATORS MODERN FINANCIAL SYSTEMS REVENUE BORROWING FOREIGN LANGUAGE INVESTMENTS RISK MANAGEMENT LENDING CHECK CREDIT INCREASES SWAPS EXCHANGE RATE CAPITAL INVESTMENT DIRECT INVESTMENTS BANK BRANCHES FINANCIAL SYSTEMS LIABILITIES HEDGE INTERNATIONAL SETTLEMENTS ASSET PRICE STOCK MARKETS FINANCIAL DEPTH CORPORATE GOVERNANCE
spellingShingle	FINANCIAL INNOVATION ECONOMIC GROWTH EQUIPMENT TRADE CREDIT CHECKS ACCOUNTING CAPITAL ACCUMULATION FOREIGN DIRECT INVESTMENTS FINANCING STOCK FOREIGN EXCHANGE MARKET INTEREST PUBLIC EDUCATION DUMMY VARIABLES GUARANTEES ENROLLMENT BIAS PROPERTY RIGHTS PRIVATE CREDIT EXCHANGE STOCK MARKET HEDGE FUNDS INTERNATIONAL FINANCIAL MARKETS DEVELOPING COUNTRIES BANKING SYSTEMS BLACK MARKET POLITICAL ECONOMY OUTSTANDING CREDIT BARRIER TO ENTRY LOAN BORROWERS STOCK MARKET CAPITALIZATION DUMMY VARIABLE CAPITAL MARKET LIBERALIZATION INTERNATIONAL BANK FINANCIAL ACCESS INDICATORS CREDIT BANK INSTRUMENTS BANK LENDING EXTERNAL FINANCE PRIVATE BOND SAVINGS LEGAL CONSTRAINTS SECURITIES MARKET FINANCIAL STUDIES BOND MARKET CAPITALIZATION EXCHANGE RATES TRADING OPTIONS MONETARY FUND GLOBALIZATION MARKET TURNOVER MARKETS DEBT CAPITAL MARKET RETURN OPEN ECONOMY BUSINESS CYCLE ECONOMIC POLICIES LOANS ENTERPRISES BANK CREDIT RULE OF LAW FINANCIAL SYSTEM RETURN ON ASSETS FINANCE BANKING SECTOR BANKS INFORMATION ASYMMETRY DEBT FINANCING EQUITY GRANT HUMAN CAPITAL BOND MARKETS GOOD CAPITAL LOANS TO ENTERPRISES FINANCIAL STABILITY LEGAL ENVIRONMENTS PRIVATE SECTOR CREDIT MARKET CAPITALIZATION STUDENT FINANCIAL CRISIS TURNOVER FUTURE BANK RETURNS CREDIT BOND MARKET CAPITALIZATION PRICE STABILITY BANKING SECTOR DEVELOPMENT PROPERTY AMOUNT OF CREDIT SHARES FINANCIAL ACCESS MARKET LOAN QUALITY DEFAULT FOREIGN EXCHANGE MARKET VALUE SECURITIES BANK ACCOUNTS EXTERNAL CAPITAL ECONOMIC DEVELOPMENT MISSING MARKET SECURITY FINANCIAL DEVELOPMENT BANK BRANCH INVESTMENT FINANCIAL INTERMEDIATION BOND FINANCIAL INTERMEDIARIES LACK OF KNOWLEDGE DOMESTIC CREDIT FINANCIAL INSTABILITY SHARE HOUSEHOLDS ECONOMIC CRISIS FINANCIAL MARKETS ACCESS INDICATORS MODERN FINANCIAL SYSTEMS REVENUE BORROWING FOREIGN LANGUAGE INVESTMENTS RISK MANAGEMENT LENDING CHECK CREDIT INCREASES SWAPS EXCHANGE RATE CAPITAL INVESTMENT DIRECT INVESTMENTS BANK BRANCHES FINANCIAL SYSTEMS LIABILITIES HEDGE INTERNATIONAL SETTLEMENTS ASSET PRICE STOCK MARKETS FINANCIAL DEPTH CORPORATE GOVERNANCE Hasan, Iftekhar Horvath, Roman Mares, Jan What Type of Finance Matters for Growth? : Bayesian Model Averaging Evidence
relation	Policy Research Working Paper;No. 7645
description	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.
format	Working Paper
author	Hasan, Iftekhar Horvath, Roman Mares, Jan
author_facet	Hasan, Iftekhar Horvath, Roman Mares, Jan
author_sort	Hasan, Iftekhar
title	What Type of Finance Matters for Growth? : Bayesian Model Averaging Evidence
title_short	What Type of Finance Matters for Growth? : Bayesian Model Averaging Evidence
title_full	What Type of Finance Matters for Growth? : Bayesian Model Averaging Evidence
title_fullStr	What Type of Finance Matters for Growth? : Bayesian Model Averaging Evidence
title_full_unstemmed	What Type of Finance Matters for Growth? : Bayesian Model Averaging Evidence
title_sort	what type of finance matters for growth? : bayesian model averaging evidence
publisher	World Bank, Washington, DC
publishDate	2016
url	http://documents.worldbank.org/curated/en/2016/04/26241066/type-finance-matters-growth-bayesian-model-averaging-evidence http://hdl.handle.net/10986/24219
_version_	1764455961071714304

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

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