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Table 4.

Endogeneity Dependent variable: economic growth rate (⁠

	Difference GMM	System GMM
Growth_c,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 ratio_t−1	−0.001^***	−0.000^*
	(−1.86)	(−2.67)
Trade openness_t−1	−0.028^*	−0.009^*
	(−5.38)	(−4.18)
Govt. expenditure share_t−1	−0.496^*	−0.072^*
	(−8.98)	(−4.97)
Investment share_t−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 GMM	System GMM
Growth_c,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 ratio_t−1	−0.001^***	−0.000^*
	(−1.86)	(−2.67)
Trade openness_t−1	−0.028^*	−0.009^*
	(−5.38)	(−4.18)
Govt. expenditure share_t−1	−0.496^*	−0.072^*
	(−8.98)	(−4.97)
Investment share_t−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/