for valuable comments and suggestions. The authors also would like to thank Ms. Asmahan Bedri and Ms. Yasmina Zinbi for help in editing and formatting the paper.

No abstract

A large theoretical and empirical literature has focused on the impact of fi nancial deepening on economic growth throughout the world. This paper contributes to the literature by investigating whether this impact differs across regions, income levels, and types of economy. Using a rich data set for 150 countries for the period 1975-2005, dynamic panel estimation results suggest that the benefi cial effect of fi nancial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that these differences might be driven by the degree of competition, and related to differences in the ability to provide widespread access to fi nancial services. JEL Classifi cation: G2, O0, O4, O5, O53

A large theoretical and empirical literature has focused on the impact of fi nancial deepening on economic growth throughout the world. This paper contributes to the literature by investigating whether this impact differs across regions, income levels, and types of economy. Using a rich data set for 150 countries for the period 1975-2005, dynamic panel estimation results suggest that the benefi cial effect of fi nancial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that these differences might be driven by the degree of competition, and related to differences in the ability to provide widespread access to fi nancial services. JEL Classifi cation: G2, O0, O4, O5, O53

Remittance inflows have increased considerably in recent years and are large relative to the size of many recipient economies. The theoretical and empirical effects of remittance inflows on output growth volatility are, however, ambiguous. On the one hand, remittances have been a remarkably stable source of income, relative to other private and public flows, and they seem to be compensatory in nature, rising when the home country's economy suffers a downturn. On the other hand, the labor supply effects induced by altruistic remittances could cause the output effects associated with technology shocks to be magnified. This paper finds robust evidence for a sample of 70 remittance-recipient countries, including 16 advanced economies and 54 developing countries that remittances have a negative effect on output growth volatility, thereby supporting the notion that remittance flows are a stabilizing influence on output. JEL Classification Numbers: D02, D64, F02, F22, F24