Financing the economy: The multidimensional influences of financial development on economic complexity

Abstract This study examines how financial development influences economic complexity, using a broad index of financial development. By utilising a global sample of 86 countries over the period 2002–2017 and applying several econometric techniques, we find that financial institutions and financial markets, as well as their sub‐indices (financial depth, financial access and financial efficiency), have significantly positive impacts on economic complexity. Interestingly, financial institutions have a stronger effect than financial markets, and it is the same with financial efficiency over financial access and financial depth. Three subsamples comprising 28 low‐ and lower‐middle‐income countries, 22 upper‐middle‐income countries and 36 high‐income countries are examined.