Financial Development, Institutions and Economic Growth: A Comparative Analysis of Developed and Developing Countries

This study highlights the impact of financial development on economic growth by exploring the role of different institutions. Regarding this context we utilized balanced dataset of 41 countries (developed and developing) categorized on the basis of income, from 1980-2023 by using two step system GMM. The overall results showed that there is a conclusive impact of financial development on economic growth. However, findings showed that financial development is adequately playing its role in developing countries as compared to developed countries where more finance adversely affects the growth. But under the presence of sound institutions financial development successfully contributes towards the economic benefits.