Alessandra Dal Colle Stievano :

Abstract : This paper offers a contribution to the empirical literature on the links between financial and economic development. In the investigation of the finance-growth nexus for 18 non-OECD countrie splus Mexico and Korea, the paper firstly introduces an indicator of restrictions on the establishment of foreign banks. Secondly, it links financial development to the capital–output ratio rather to the level of income per se, implicitly assuming that a sound financial development has to be relatively capital-intensive. A new procedure is systematically applied to take proper consideration of crisis periods through the use of dummies. The paper finds that in the long run most countries support the capital-out put ratio specification for the financial development relationship. Also, ”fairlyliberal” countries show a negative contribution of financial openness to financial development. The non-linearity between finance and growth seems to be confirmed by the growing elasticity of the capital output ratio in relatively developed countries. Finally, some large countries seem to support the endogenous growth hypotheses while most African countries turnout as ”cursed”, since neither accumulation nor openness can explain their growth (or, rather, lack thereof).