Finance-LED growth in the OECD since the nineteenth century: How does financial development transmit to growth?

Jakob B. Madsen, James B. Ang

Research output: Contribution to journalArticleResearchpeer-review

48 Citations (Scopus)


It is well established in the literature that financial development (FD) is conducive to growth, and yet the channels through which FD affects growth are not well understood. Using a unique new panel data set for 21 OECD countries over the past 140 years, this paper examines the extent to which FD transmits to growth through ideas production, savings, fixed investment, and schooling. Unionization and agricultural share are used as instruments for FD. The empirical results show that FD influences growth through all four channels. In particular, ideas production is found to be the most important channel through which FD affects growth.
Original languageEnglish
Pages (from-to)552-572
Number of pages21
JournalReview of Economics and Statistics
Issue number3
Publication statusPublished - 1 Jul 2016

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