Giving credit to credit

Sammanfattning: Financial intermediaries are ubiquitous in modern society and its impact have been exhaustively studied. A particularly vibrant field of research concerns the interrelationship between financial and economic development. While much research has been carried out on this topic, most only focus on narrow measures of both economic and financial development. Hence, this study assumes a wider approach by constructing more refined conceptions of financial and economic development. Since the field is also divided along methodological lines, we attempt to arbitrate the differences by employing both long and short-run econometric models. Since some research indicates an income-based response to financial development we also fracture our sample according to income. Our results support that there is causality between financial development and economic development, but that the direction of causality varies with different measures of financial development and with income. We also find support for a pronounced effect of financial development for lower income-countries. The effects of financial intermediation on the growth of RGDP appears to be channelled through capital accumulation and the growth of technological innovation.