Testing the Financial Convergence Hypothesis and Estimating the Convergence Rate in Selected Countries
DOI:
https://doi.org/10.5377/reice.v10i20.16024Keywords:
Convergence, Financial Deepening, Capital Account, Dynamic PanelAbstract
The hypothesis of financial convergence as one of the results of neoclassical economic growth models, emphasizes the process of reducing the financial gap between countries. The main purpose of this study is to test the financial convergence hypothesis and estimate the convergence rate in selected developed and developing countries by using GMM during the period 2018-1990. Results According to both of two models, the domestic credit to the private sector (percentage of GDP) and the current money to GDP approved the financial convergence in these countries. Also, the convergence rate in term of domestic credit to the private sector in developing countries is higher than that’s in developed countries. However, Convergence rate in term of current money to GDP between the two groups of developing and developed countries is very small and about 1%.
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