Please join Barney School of Business Dean Marty Roth in congratulating Barney School of Business Associate Dean and Professor of Economics, Farhad Rassekh, on his recently accepted journal article. "The Impact of Financial Development on Income Convergence: An Application of Two Exogenous Growth Models,” will appear in International Review of Economics and Finance, an “A” rated journal.
Abstract: The literature has established that financial institutions and financial markets have a significant impact on economic growth. The present paper seeks to determine whether they increase the speed of convergence towards the steady-state income. If so, then financial development is a convergence factor in addition to being a growth factor. To carry out our study, we employ the growth model of Ramsey-Cass-Koopman as well as that of Diamond. The RCK model predicts financial development positively affects the speed of convergence while the Diamond model predicts only a level effect. Our empirical analysis supports the prediction of the RCK model.