This paper analyzes how interacting financial development with initial income, macroeconomic volatility and policy variables, can improve our understanding of convergence and divergence across countries, and also restore the significance of correlations between growth and volatility and therefore between growth and macropolicy, even when controlling for country fixed effects or when eliminating countries with extreme policies or bad institutions.
Capitalism and Society
A Journal of the Center on Capitalism and Society
Ed. by Phelps, Edmund / Bhidé, Amar
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Volume 1 (2006)
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Interaction Effects in the Relationship Between Growth and Finance
Philippe Aghion
1Harvard University
Citation Information: Capitalism and Society. Volume 1, Issue 1, Pages –, ISSN (Online) 1932-0213, DOI: 10.2202/1932-0213.1003, May 2006
Publication History:
- Published Online:
- 2006-05-22
Keywords: financial development; convergence; volatility; interaction effects; countercyclical policy
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