CEPAL Review no. 128

This study examines the relationship between economic growth and financial development in Brazil using a data panel of all Brazilian states from 1995-2014. It analyzes the direction of this relationship, characterizing it as linear or non-linear for each financial development indicator, concluding that the relationship is positive and non-linear.

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Quick Facts
Report location: source
Language: English
Publisher:

Economic Commission For Latin America And The Caribbean

Time horizon: 2014
Geographic focus: Brazil
Page count: páginas. 21

Methods

The flexible regression model approach allows for testing non-linearity, identifying contributing variables, determining the relationship form, and not imposing an ex ante functional form. Econometric procedures include representing the model in GLS form, optimizing the log likelihood function, and testing for non-linearity.

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Key Insights

The methodology involves constructing a data panel of Brazilian states from 1995-2014, with control variables and proxies for economic growth and financial development. The relationship is analyzed for five different indicators of financial development using a flexible regression model to determine linearity or non-linearity.

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