Too Much Finance Redux

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Authors: Jean-Louis Arcand, Enrico Berkes, Ugo Panizza
Cited by: 3
References: 16

Abstract

ABSTRACT This paper revisits the “too much finance” hypothesis by reassessing the relationship between financial depth and economic growth using an expanded dataset (1960–2019) and a systematic estimation strategy that avoids reliance on any single, potentially arbitrary sample window. We estimate both cross‐sectional and panel models for all feasible starting periods and focus on transparent specifications. We find a robust inverted‐U relationship between private credit and growth: financial depth is growth‐enhancing at low and moderate levels but exhibits diminishing returns and eventually becomes negative at high levels. The turning point generally lies between 70 and 120 percent of GDP, almost always below the 90th percentile of the global distribution of credit to the private sector.

Fields of Study & Subjects

Banking stability regulation efficiency Microfinance and Financial Inclusion Economic and Technological Innovation

Publication details

Journal / source
Manchester School
Publisher
Wiley
Publication date
30 June 2026
Language
EN