| Financial development measure | M2/GDP | Private credit/GDP | Private credit/GDP | Private credit/GDP |
|---|---|---|---|---|
| RER construction source | PWT 8.0 | IMF | PWT 8.0 5-year-averaged | PWT 8.0 |
| Data | panel (1) | panel (2) | panel (3) | cross-section (4) |
| Real GDP per workert−1 | −0.060* | −0.047* | −0.099* | −0.013* |
| (−10.91) | (−6.66) | (−15.71) | (−8.15) | |
| Underval | 0.081* | 0.066* | 0.047** | 0.020*** |
| (3.32) | (5.81) | (2.34) | (1.97) | |
| Fin devt | −0.016* | −0.011* | 0.002 | 0.001 |
| (−2.94) | (−2.70) | (0.60) | (0.34) | |
| Underval × fin devt | −0.021* | −0.020* | −0.010** | −0.007*** |
| (−3.09) | (−5.42) | (−2.31) | (−1.72) | |
| Dependency ratiot−1 | −0.000 | 0.000 | −0.000 | −0.001* |
| (−1.60) | (1.01) | (−1.32) | (−6.75) | |
| Trade opennesst−1 | 0.010* | 0.045* | 0.014** | 0.006** |
| (3.18) | (5.32) | (2.26) | (2.49) | |
| Govt. expenditure sharet−1 | −0.065* | −0.022 | −0.054** | −0.029*** |
| (−3.00) | (−0.76) | (−2.08) | (−1.83) | |
| Investment sharet−1 | 0.037*** | 0.013 | 0.037 | 0.059* |
| (1.65) | (0.43) | (1.23) | (3.23) | |
| Fixed effects | ||||
| Economy fixed effect | Yes | Yes | Yes | |
| Year fixed effect | Yes | Yes | Yes | |
| Observations | 3,682 | 1,960 | 677 | 127 |
| R2 | 0.090 | 0.110 | 0.388 | 0.488 |
| Financial development measure | M2/GDP | Private credit/GDP | Private credit/GDP | Private credit/GDP |
|---|---|---|---|---|
| RER construction source | PWT 8.0 | IMF | PWT 8.0 5-year-averaged | PWT 8.0 |
| Data | panel (1) | panel (2) | panel (3) | cross-section (4) |
| Real GDP per workert−1 | −0.060* | −0.047* | −0.099* | −0.013* |
| (−10.91) | (−6.66) | (−15.71) | (−8.15) | |
| Underval | 0.081* | 0.066* | 0.047** | 0.020*** |
| (3.32) | (5.81) | (2.34) | (1.97) | |
| Fin devt | −0.016* | −0.011* | 0.002 | 0.001 |
| (−2.94) | (−2.70) | (0.60) | (0.34) | |
| Underval × fin devt | −0.021* | −0.020* | −0.010** | −0.007*** |
| (−3.09) | (−5.42) | (−2.31) | (−1.72) | |
| Dependency ratiot−1 | −0.000 | 0.000 | −0.000 | −0.001* |
| (−1.60) | (1.01) | (−1.32) | (−6.75) | |
| Trade opennesst−1 | 0.010* | 0.045* | 0.014** | 0.006** |
| (3.18) | (5.32) | (2.26) | (2.49) | |
| Govt. expenditure sharet−1 | −0.065* | −0.022 | −0.054** | −0.029*** |
| (−3.00) | (−0.76) | (−2.08) | (−1.83) | |
| Investment sharet−1 | 0.037*** | 0.013 | 0.037 | 0.059* |
| (1.65) | (0.43) | (1.23) | (3.23) | |
| Fixed effects | ||||
| Economy fixed effect | Yes | Yes | Yes | |
| Year fixed effect | Yes | Yes | Yes | |
| Observations | 3,682 | 1,960 | 677 | 127 |
| R2 | 0.090 | 0.110 | 0.388 | 0.488 |
GDP = gross domestic product, IMF = International Monetary Fund, PWT = Penn World Tables, RER = real effective exchange rate.
Notes:
1. Observations are annual data for the period 1980–2011.
2. The measures of financial development are the same as indicated in the column headings.
3. Both undervaluation and private credit/GDP are in logarithmic form.
4. Panel regressions in columns (1)–(3) include both economy and year fixed effects. Column (4) reports the estimates of cross-sectional data where all of the control variables are averaged over the period 1980–2011 and real GDP per workert−1 refers to the value at the beginning year.
5. t-statistics are in parenthesis.
6. *** = 10% level of statistical significance, ** = 5% level of statistical significance, * = 1% level of statistical significance.
Sources: Authors’ calculations based on World Bank. “World Development Indicators.” http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators; Penn World Tables 8.0. http://www.rug.nl/research/ggdc/data/pwt/