Finance and growth: Nonlinearity and structural shifts

Konstantin Krinichansky () and Maksim Yurevich ()
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Konstantin Krinichansky: Financial University under the Government of the RF, Moscow, Russian Federation;
Maksim Yurevich: Financial University under the Government of the RF, Moscow, Russian Federation;

Applied Econometrics, 2023, vol. 72, 5-22

Abstract: his study focuses on the nature and limits of the relationship between financial development and economic growth. The revealed non-linearity of this relationship is associated with a latent restructuring of mechanisms of economic financing, which took place during the financial and economic crisis of 2007-2009 and the years following it. The crisis, which hit the banking sector the hardest, simultaneously increased the role of the stock market. Using the two-step system GMM approach and the structural breaks algorithm, it is shown that the economic growth rates after 2010 are significantly related to stock market indicators, rather than the credit depth ones commonly used in finance-growth models.

Keywords: financial development; financial depth; stock market capitalization; economic growth; non-linearity; structural breaks. (search for similar items in EconPapers)
JEL-codes: C23 C58 O11 O16 (search for similar items in EconPapers)
Date: 2023
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