Is finance a curse? reinvestigate the relationship between finance and economic growth


ÜZAR U.

JOURNAL OF SUSTAINABLE FINANCE & INVESTMENT, 2021 (Journal Indexed in ESCI) identifier

  • Publication Type: Article / Article
  • Publication Date: 2021
  • Doi Number: 10.1080/20430795.2021.2012111
  • Title of Journal : JOURNAL OF SUSTAINABLE FINANCE & INVESTMENT
  • Keywords: Financial development, economic growth, E-7 countries, finance curse, SPECIFICATION, TESTS, TOO

Abstract

The connection between finance and economic growth has a special place in modern economic literature. In the literature, despite the connection between finance and economic growth is mostly examined in linear form, the negative effects of financial sector crises on economic growth in recent years have motivated researchers to work in a non-linear form. In this context, the existence of the finance curse, which states that finance can harm economic growth after the threshold point, has been further investigated. The goal of this study is to research whether the finance curse hypothesis is valid in the E-7 countries for 2001-2017 by employing pan& ARDL method. In the study using domestic credit to private sector as financial indicators, empirical findings display that the finance curse hypothesis is not valid in E-7. In contrast to the finance curse hypothesis, it has been discovered that financial development increases economic growth after the threshold point in these countries. Within the framework of the results, it can be said that a controlled financial development supported by strong financial regulations will be an important factor for economic growth in E-7 countries.