Financial Development, Financial Instability and Growth: A Reappraisal

This paper analyses empirically the relationship between \u85nancial devel-opment and economic growth. We introduce di¤erent measures of \u85nancial instability in the analysis. Using cross section and dynamic panel for 71 coun-tries over the period 1960-2004, the results show that, it exists positive link between nancial development and economic growth in short and long-term. However, \u85 nancial instability does not a¤ect economic growth and the link be-tween this last and the \u85nancial development at long-term on the one hand. On the other hand, in the short run, \u85 nancial instability has negative incidence not only on economic growth but also on \u85nancial development and growth nexus.-Keywords: Economic growth, \u85 nancial development, \u85 nancial instability.-JEL Classi\u85cation: O16, O47, G23.