A nonparametric model of financial system and economic growth

In this paper, we show that in the proposed models for economic growth, the financial system variables are generally nonparametric. We, thus, use a nonparametric panel data model to estimate the financial system-economic growth relationship. Our results suggest that as long as a country's domestic credit and private credit are above their cross-sectional mean they have a positive effect on GDP growth. We also discover that market capitalisation positively and significantly impacts GDP growth, while stocks traded (with the exception of OECD countries) has a statistically insignificant effect on GDP growth.