Finance and growth: new evidence from meta-analysis
Abstract
Purpose
The purpose of this paper is to bridge the gap between the pros and cons of a questionable finance-growth nexus.
Design/methodology/approach
Over 20 fundamental characteristics that have influenced the debate over the last decades have been examined. The empirical evidence is based on 196 outcomes from 20 studies. The author assesses the degree of heterogeneity and identify causes of the observed differentiation.
Findings
The findings also show evidence of publication bias. Overall, a genuine effect exists between financial development and economic growth. A finance-growth nexus might not be appealing in our era because of: endogeneity-based estimations, publication bias, and effects of financial activity. A historical justification has also been discussed.
Practical implications
Encouraging the publication of results with findings that are not consistent with the mainstream positive finance-growth nexus should provide new scholarly insights into the relationship. Depending on the specific context of sampled countries, the role of policy has also been to encourage financial development through measures that may expose countries to negative external shocks like financial crises. Policy makers that have been viewing the challenges of development exclusively from this point of view for the rewards of growth may not be getting the financial dynamics correctly.
Originality/value
Very few meta-analysis studies have focused on the finance-growth nexus.
Keywords
Acknowledgements
JEL Classification – C1, C4, E0, 00
The author is highly indebted to the referees and editor for useful comments. The African Governance and Development Institute (AGDI) Working Paper Series grants Managerial Finance the right to publish the paper. The AGDI Working Paper Series is like many mainstream working papers series’ which completely transfer the right to reproduction to a journal once the paper has been accepted for publication. Hence, the AGDI would not reproduce the paper without approval from Managerial Finance. The author of the paper represents the AGDI in transferring this copyright because he is the Founder, the Proprietor and a Lead Economist of the AGDI.
Citation
Asongu, S.A. (2015), "Finance and growth: new evidence from meta-analysis", Managerial Finance, Vol. 41 No. 6, pp. 615-639. https://doi.org/10.1108/MF-09-2013-0249
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited