Finance and Poverty: Evidence from Panel Study

摘要

This paper presents empirical evidence of a direct relationship between financial development and poverty. A poverty determination model that integrates financial development and financial instability is considered. Using panel data for sixty-eight developing countries over the period 1980-2004, the study finds that, on average, financial development is conducive for poverty reduction but that the instability accompanying financial development is detrimental to the poor. This outcome only holds when financial development is measured by the ratio of money to GDP (M3-GDP) and not by the credit-GDP ratio.