This paper investigates the role of financial intermediaries development in stimulating economic growth for 71 countries. Using conventional models and various indicators of financial development, we confirm the positive impact of financial development on economic growth. We further analyze the asymmetric effect of financial intermediary development on the range of growth distribution using quantile regression model developed by Koenker and Basset (1978) and instrumental variables quantile regression model developed by Chernozhukov and Hansen (2004b, 2005). We find that financial development does not have an uniform effect across the range of growth quantiles. The benefits are markedly higher for countries at higher levels of growth. The findings emphasize the important role of financial development in promoting economic growth. Nonetheless, acceleration of financial development is not the panacea for less developed countries. Financial reforms have to be complemented with social, economic and political reforms to place these countries on the path of rapid economic growth and prosperity.
International Journal of Finance 21(2), pp.6035-6079