Current - Issue
Year 2026 · Volume 6 · Issue 5
Original Article
Too Much Finance? Nonlinear Effects of Household and Corporate Credit on Economic Growth: Cross-Country Evidence
Cinoj George1
1 Faculty of Health Sciences, Girne American University, Kyrenia, Cyprus.
Published Online: September-October 2026
Pages: 255-264
Cite this article
↗ https://www.doi.org/10.59256/ijrtmr.20260605028
References
1. Schumpeter, J. A. (1934). The Theory of Economic Development. Harvard University Press, Cambridge, MA. English translation of the 1911 German edition.
2. Gurley, J. G., Shaw, E. S. (1955). Financial aspects of economic development. American Economic Review 45(4), 515–538.
3. McKinnon, R. I. (1973). Money and Capital in Economic Development. Brookings Institution, Washington, DC.
4. Shaw, E. S. (1973). Financial Deepening in Economic Development. Oxford University Press, New York.
5. Levine, R. (1997). Financial development and economic growth: views and agenda. Journal of Economic Literature 35(2), 688–726.
6. King, R. G., Levine, R. (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics 108(3), 717–737. https://doi.org/10.2307/2118406.
7. Rajan, R. G., Zingales, L. (1998). Financial dependence and growth. American Economic Review 88(3), 559–586.
8. Levine, R., Loayza, N., Beck, T. (2000). Financial intermediation and growth: causality and causes. Journal of Monetary Economics 46(1), 31–77. https://doi.org/10.1016/S0304-3932(00)00017-9.
9. Beck, T., Levine, R., Loayza, N. (2000). Finance and the sources of growth. Journal of Financial Economics 58(1–2), 261–300. https://doi.org/10.1016/S0304-405X(00)00072-6.
10. Pagano, M. (1993). Financial markets and growth: an overview. European Economic Review 37(2–3), 613–622. https://doi.org/10.1016/0014-2921(93)90051-B.
11. Arcand, J.-L., Berkes, E., Panizza, U. (2015). Too much finance? Journal of Economic Growth 20(2), 105–148. https://doi.org/10.1007/s10887-015-9115-2.
12. Law, S. H., Singh, N. (2014). Does too much finance harm economic growth? Journal of Banking & Finance 41, 36–44. https://doi.org/10.1016/j.jbankfin.2013.12.020.
13. Cecchetti, S. G., Kharroubi, E. (2012). Reassessing the impact of finance on growth. BIS Working Papers No. 381, Bank for International Settlements, Basel.
14. Cecchetti, S. G., Kharroubi, E. (2015). Why does financial sector growth crowd out real economic growth? Economic Policy 30(82), 405–443. https://doi.org/10.1093/epolic/eiv004.
15. Sahay, R., Čihák, M., N’Diaye, P., Barajas, A., Bi, R., Ayala, D., Gao, Y., Kyobe, A., Nguyen, L., Saborowski, C., Svirydzenka, K., Yousefi, S. R. (2015). Rethinking financial deepening: stability and growth in emerging markets. IMF Staff Discussion Note SDN/15/08.
16. Beck, T., Büyükkarabacak, B., Rioja, F. K., Valev, N. T. (2012). Who gets the credit? And does it matter? Household vs. firm lending across countries. B.E. Journal of Macroeconomics 12(1), Article 2, 1–46. https://doi.org/10.1515/1935-1690.2262.
17. Mian, A., Sufi, A., Verner, E. (2017). Household debt and business cycles worldwide. Quarterly Journal of Economics 132(4), 1755–1817. https://doi.org/10.1093/qje/qjx017.
18. Lombardi, M. J., Mohanty, M. S., Shim, I. (2017). The real effects of household debt in the short and long run. BIS Working Papers No. 607.
19. Büyükkarabacak, B., Valev, N. T. (2010). The role of household and business credit in banking crises. Journal of Banking & Finance 34(6), 1247–1256. https://doi.org/10.1016/j.jbankfin.2009.11.022.
20. Schularick, M., Taylor, A. M. (2012). Credit booms gone bust: monetary policy, leverage cycles, and financial crises, 1870–2008. American Economic Review 102(2), 1029–1061. https://doi.org/10.1257/aer.102.2.1029.
21. Jordà, Ò., Schularick, M., Taylor, A. M. (2013). When credit bites back. Journal of Money, Credit and Banking 45(S2), 3–28. https://doi.org/10.1111/jmcb.12069.
22. Philippon, T. (2010). Financiers versus engineers: should the financial sector be taxed or subsidized? American Economic Journal: Macroeconomics 2(3), 158–182. https://doi.org/10.1257/mac.2.3.158.
23. Borio, C. (2014). The financial cycle and macroeconomics: what have we learnt? Journal of Banking & Finance45, 182–198. https://doi.org/10.1016/j.jbankfin.2013.07.031.
24. Hansen, B. E. (1999). Threshold effects in non-dynamic panels: estimation, testing, and inference. Journal of Econometrics 93(2), 345–368. https://doi.org/10.1016/S0304-4076(99)00025-1.
25. Lind, J. T., Mehlum, H. (2010). With or without U? The appropriate test for a U-shaped relationship. Oxford Bulletin of Economics and Statistics 72(1), 109–118. https://doi.org/10.1111/j.1468-0084.2009.00569.x.
26. Arellano, M., Bond, S. (1991). Some tests of specification for panel data. Review of Economic Studies 58(2), 277–297. https://doi.org/10.2307/2297968.
27. Driscoll, J. C., Kraay, A. C. (1998). Consistent covariance matrix estimation with spatially dependent panel data. Review of Economics and Statistics 80(4), 549–560. https://doi.org/10.1162/003465398557825.
28. Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. IZA Discussion Paper No. 1240.
29. Dembiermont, C., Drehmann, M., Muksakunratana, S. (2013). How much does the private sector really borrow? BIS Quarterly Review, March, 65–81.
30. International Monetary Fund (2022). World Economic Outlook Database, April 2022 Edition. Washington, DC.
31. Bank for International Settlements (2022). Credit to the non-financial sector database. Vintage accessed through ALFRED, 30 April 2022.
32. World Bank (2021). Global Financial Development Database, November 2021 version. Washington, DC.
33. Nickell, S. (1981). Biases in dynamic models with fixed effects. Econometrica 49(6), 1417–1426. https://doi.org/10.2307/1911408.
2. Gurley, J. G., Shaw, E. S. (1955). Financial aspects of economic development. American Economic Review 45(4), 515–538.
3. McKinnon, R. I. (1973). Money and Capital in Economic Development. Brookings Institution, Washington, DC.
4. Shaw, E. S. (1973). Financial Deepening in Economic Development. Oxford University Press, New York.
5. Levine, R. (1997). Financial development and economic growth: views and agenda. Journal of Economic Literature 35(2), 688–726.
6. King, R. G., Levine, R. (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics 108(3), 717–737. https://doi.org/10.2307/2118406.
7. Rajan, R. G., Zingales, L. (1998). Financial dependence and growth. American Economic Review 88(3), 559–586.
8. Levine, R., Loayza, N., Beck, T. (2000). Financial intermediation and growth: causality and causes. Journal of Monetary Economics 46(1), 31–77. https://doi.org/10.1016/S0304-3932(00)00017-9.
9. Beck, T., Levine, R., Loayza, N. (2000). Finance and the sources of growth. Journal of Financial Economics 58(1–2), 261–300. https://doi.org/10.1016/S0304-405X(00)00072-6.
10. Pagano, M. (1993). Financial markets and growth: an overview. European Economic Review 37(2–3), 613–622. https://doi.org/10.1016/0014-2921(93)90051-B.
11. Arcand, J.-L., Berkes, E., Panizza, U. (2015). Too much finance? Journal of Economic Growth 20(2), 105–148. https://doi.org/10.1007/s10887-015-9115-2.
12. Law, S. H., Singh, N. (2014). Does too much finance harm economic growth? Journal of Banking & Finance 41, 36–44. https://doi.org/10.1016/j.jbankfin.2013.12.020.
13. Cecchetti, S. G., Kharroubi, E. (2012). Reassessing the impact of finance on growth. BIS Working Papers No. 381, Bank for International Settlements, Basel.
14. Cecchetti, S. G., Kharroubi, E. (2015). Why does financial sector growth crowd out real economic growth? Economic Policy 30(82), 405–443. https://doi.org/10.1093/epolic/eiv004.
15. Sahay, R., Čihák, M., N’Diaye, P., Barajas, A., Bi, R., Ayala, D., Gao, Y., Kyobe, A., Nguyen, L., Saborowski, C., Svirydzenka, K., Yousefi, S. R. (2015). Rethinking financial deepening: stability and growth in emerging markets. IMF Staff Discussion Note SDN/15/08.
16. Beck, T., Büyükkarabacak, B., Rioja, F. K., Valev, N. T. (2012). Who gets the credit? And does it matter? Household vs. firm lending across countries. B.E. Journal of Macroeconomics 12(1), Article 2, 1–46. https://doi.org/10.1515/1935-1690.2262.
17. Mian, A., Sufi, A., Verner, E. (2017). Household debt and business cycles worldwide. Quarterly Journal of Economics 132(4), 1755–1817. https://doi.org/10.1093/qje/qjx017.
18. Lombardi, M. J., Mohanty, M. S., Shim, I. (2017). The real effects of household debt in the short and long run. BIS Working Papers No. 607.
19. Büyükkarabacak, B., Valev, N. T. (2010). The role of household and business credit in banking crises. Journal of Banking & Finance 34(6), 1247–1256. https://doi.org/10.1016/j.jbankfin.2009.11.022.
20. Schularick, M., Taylor, A. M. (2012). Credit booms gone bust: monetary policy, leverage cycles, and financial crises, 1870–2008. American Economic Review 102(2), 1029–1061. https://doi.org/10.1257/aer.102.2.1029.
21. Jordà, Ò., Schularick, M., Taylor, A. M. (2013). When credit bites back. Journal of Money, Credit and Banking 45(S2), 3–28. https://doi.org/10.1111/jmcb.12069.
22. Philippon, T. (2010). Financiers versus engineers: should the financial sector be taxed or subsidized? American Economic Journal: Macroeconomics 2(3), 158–182. https://doi.org/10.1257/mac.2.3.158.
23. Borio, C. (2014). The financial cycle and macroeconomics: what have we learnt? Journal of Banking & Finance45, 182–198. https://doi.org/10.1016/j.jbankfin.2013.07.031.
24. Hansen, B. E. (1999). Threshold effects in non-dynamic panels: estimation, testing, and inference. Journal of Econometrics 93(2), 345–368. https://doi.org/10.1016/S0304-4076(99)00025-1.
25. Lind, J. T., Mehlum, H. (2010). With or without U? The appropriate test for a U-shaped relationship. Oxford Bulletin of Economics and Statistics 72(1), 109–118. https://doi.org/10.1111/j.1468-0084.2009.00569.x.
26. Arellano, M., Bond, S. (1991). Some tests of specification for panel data. Review of Economic Studies 58(2), 277–297. https://doi.org/10.2307/2297968.
27. Driscoll, J. C., Kraay, A. C. (1998). Consistent covariance matrix estimation with spatially dependent panel data. Review of Economics and Statistics 80(4), 549–560. https://doi.org/10.1162/003465398557825.
28. Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. IZA Discussion Paper No. 1240.
29. Dembiermont, C., Drehmann, M., Muksakunratana, S. (2013). How much does the private sector really borrow? BIS Quarterly Review, March, 65–81.
30. International Monetary Fund (2022). World Economic Outlook Database, April 2022 Edition. Washington, DC.
31. Bank for International Settlements (2022). Credit to the non-financial sector database. Vintage accessed through ALFRED, 30 April 2022.
32. World Bank (2021). Global Financial Development Database, November 2021 version. Washington, DC.
33. Nickell, S. (1981). Biases in dynamic models with fixed effects. Econometrica 49(6), 1417–1426. https://doi.org/10.2307/1911408.
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