Is the finance led growth hypothesis robust to alternative measures of financial development?

In this article we employ tests of noncausation to measure the impact of financial development on 34 developing countries experiencing vastly different stages of economic development and covering annual observations over the period 1960-2009 for most countries. Focusing on the dual role of financial development and economic growth as proposed in much of the endogenous growth literature, we draw upon individual country evidence from 34 developing countries at alternative stages of economic development. Our contribution to the literature lies in our use of several tests based on multiple measures selected to represent financial development. Testing each one separately, we come up with varying patterns of correlation between finance and growth for individual countries. The variation or consistency of each measure as an influence on economic growth is both telling for policy and the determination of future patterns of growth for emerging market economies.