Do institutions influence the relationship between financial development and economic growth?

This study investigates the effect of financial development on economic growth, highlighting threshold effects depending on the quality of institutions, on a large panel of 171 developed and developing countries. The analysis mobilizes data on the six dimensions of institutional quality between 2004 and 2018. The methodological approach is based on the Panel Smooth Threshold Regression (PSTR), supplemented by the GMM system method. The results obtained very significantly show a non-linear relationship between financial development and economic growth, conditioned by institutional quality. Especially, it appears that financial development promotes economic growth in countries with "good" institutions, while the "financial curse" prevails in countries where the quality of institutions is impaired.