%0 Journal Article
%T Manufacturing and Services Growth in Developing Economies: ¡®Too Little¡¯ Finance?
%A Maria Socorro Gochoco-Bautista
%A Sarah Lynne Salvador Daway-Ducanes
%J Progress in Development Studies
%@ 1477-027X
%D 2019
%R 10.1177/1464993418807585
%X This article explores the relationship between financial development and growth in manufacturing and service sectors in 77 developing economies over the period 1984¨C2013. Specifically, we examine whether the size of the financial sector matters and if it does, whether the size of the financial sector in these countries is of a sufficient scale for credit and liquidity expansion to benefit the economy. Using the two-step system generalized method of moments, we find a u-shaped relationship between either manufacturing or services growth and financial size, indicating that a critical level of financial scale has to be achieved for financial expansion to positively affect the growth. For some 50%¨C90 per cent of the economies in the sample, there is a robustly long-run adverse effect of financial expansion on both manufacturing and services growth, indicating a case of ¡®too little¡¯ finance, likely explained by a combination of weak institutions, market failures and the existence of large and lumpy investments that require sufficient financial scale
%K Financial development
%K manufacturing growth
%K services growth
%K developing countries
%K ¡®too little¡¯ finance
%U https://journals.sagepub.com/doi/full/10.1177/1464993418807585