No abstract

No abstract

No abstract

This study considers the effects of financial development on output in a panel cointegration framework, focusing on the implications of trade and financial openness. Our analysis indicates that after controlling for cross-sectional dependence the typical relationship between finance and output does not hold in the long-run. This relationship, however, is re-established once we account for economic openness. While trade openness emerges as more important for developing countries financial openness is more important for advanced economies. In the long-run, causality runs from financial development to output in the advanced economies, while in developing economies causality is bidirectional. There is no short-run causality between financial development and output, however.JEL: F36, F21, C23, O16, O19