Beyond linearity: a critical review of the finance–growth nexus
This critical review synthesizes over a century of research on the finance–growth nexus, arguing that this relationship is not simply linear but a complex, multifaceted phenomenon contingent on institutional quality, non-linear dynamics and technological innovations – a thesis substantiated by the e...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2025-12-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2025.2514690 |
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| Summary: | This critical review synthesizes over a century of research on the finance–growth nexus, arguing that this relationship is not simply linear but a complex, multifaceted phenomenon contingent on institutional quality, non-linear dynamics and technological innovations – a thesis substantiated by the extensive literature reviewed. Employing a systematic literature review methodology, the article defines financial development as improving financial system quantity, quality and efficiency and economic growth as sustained output increases. It critically analyzes the bidirectional and often non-linear interplay between finance and growth, tracing classical theories to modern endogenous models and highlighting persistent methodological challenges. Special attention is given to financial crises, the transformative impact of financial technology (fintech) and artificial intelligence (AI), and evolving policy implications. Findings underscore the nexus’s context-dependent nature, challenging simplistic assumptions and emphasizing the need for nuanced, evidence-based policy implications to foster sustainable and inclusive economic growth in an increasingly digital global economy. |
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| ISSN: | 2332-2039 |