Financial development and investment: panel data evidence for OECD countries from 1970 to 1997

Abstract

Applying a panel error correction approach to data for 19 OECD countries from 1970 to 1997, the paper provides evidence that financial development is significantly related to investment levels. Different indicators of financial development are used. The results appear to be strongest for stock market capitalization, although the contribution of private credit issued by deposit money banks is also significant. The results go beyond previous work on the topic, which has found a significant link for low and middle-income economies, but not for those with relatively high income levels.