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Table 4. 
Endogeneity Dependent variable: economic growth rate (
Difference GMMSystem GMM
Growthc,t−1 0.018 0.038** 
 (0.91) (2.11) 
Underval 0.013 0.037** 
 (0.36) (2.46) 
Fin devt 0.053* 0.004 
 (3.90) (1.08) 
Underval × fin devt −0.003* −0.017* 
 (−0.23) (−2.75) 
Dependency ratiot−1 −0.001*** −0.000* 
 (−1.86) (−2.67) 
Trade opennesst−1 −0.028* −0.009* 
 (−5.38) (−4.18) 
Govt. expenditure sharet−1 −0.496* −0.072* 
 (−8.98) (−4.97) 
Investment sharet−1 0.247* 0.085* 
 (5.60) (5.51) 
Fixed effects   
Economy fixed effect Yes Yes 
Year fixed effect Yes Yes 
Observations 3,529 1,889 
AR(2) 0.101 0.187 
Sargan 0.103 0.201 
Difference GMMSystem GMM
Growthc,t−1 0.018 0.038** 
 (0.91) (2.11) 
Underval 0.013 0.037** 
 (0.36) (2.46) 
Fin devt 0.053* 0.004 
 (3.90) (1.08) 
Underval × fin devt −0.003* −0.017* 
 (−0.23) (−2.75) 
Dependency ratiot−1 −0.001*** −0.000* 
 (−1.86) (−2.67) 
Trade opennesst−1 −0.028* −0.009* 
 (−5.38) (−4.18) 
Govt. expenditure sharet−1 −0.496* −0.072* 
 (−8.98) (−4.97) 
Investment sharet−1 0.247* 0.085* 
 (5.60) (5.51) 
Fixed effects   
Economy fixed effect Yes Yes 
Year fixed effect Yes Yes 
Observations 3,529 1,889 
AR(2) 0.101 0.187 
Sargan 0.103 0.201 

GMM = generalized moment method.

Notes:

1. t-statistics are in parenthesis.

2. Columns (1) and (2) report the results of difference GMM and system GMM, respectively.

3. Lagged periods are t-2 and t-3.

4. *** = 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/

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