Too Much Finance?
Author:
Mr. Enrico G Berkes
Search for other papers by Mr. Enrico G Berkes in
Current site
Google Scholar
Close
,
Ugo Panizza null

Search for other papers by Ugo Panizza in
Current site
Google Scholar
Close
, and
Mr. Jean-Louis Arcand null

Search for other papers by Mr. Jean-Louis Arcand in
Current site
Google Scholar
Close
This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We use different empirical approaches to show that there can indeed be "too much" finance. In particular, our results suggest that finance starts having a negative effect on output growth when credit to the private sector reaches 100% of GDP. We show that our results are consistent with the "vanishing effect" of financial development and that they are not driven by output volatility, banking crises, low institutional quality, or by differences in bank regulation and supervision.
  • Collapse
  • Expand
IMF Working Papers