Financial Development, Economic Development and Poverty: Is there a Threshold Effect?

Abstract

The purpose of this article is to propose an empirical study that allows the determination of the threshold effects of financial development and economic development to reduce poverty. Our study, based on the PTR model developed by Hansen (1999), will be carried out on a sample of 49 countries, over the period 2004-2017. The main results show that the effect of financial development on poverty is a function of levels of economic development and financial development. The results conclude that threshold levels associated with financial development and economic development are necessary to have a significant reduction in poverty. Thus, economic policies aiming to promote financial development are necessary in poverty reduction strategies; theses economic policies must be sufficient to place the economy above the thresholds and successfully fight poverty.