Analyzing the Importance of Forward Orientation in Financial Development-Economic Growth Nexus: Evidence from Big Data

Abstract

The authors analyze how the citizens’ attitude toward the future, obtained using big data, affects the relationship between the nation’s financial development and economic growth. The relationship between financial development and economic growth has been ambiguous, as the literature supports both positive and negative effects of financial development on economic growth. We find that the individual’s attitude toward the future, as captured by the Future Orientation Index, plays a significant role in affecting this relation. In particular, the Future Orientation Index interacts with financial development and weakens the negative effect of financial development on nation’s economic growth, especially in high-income countries.

Keywords:

• Economic growth
• Financial development
• Future orientation index
• Random effects
• 2 Stage least squares

Acknowledgments

The authors would like to thank Siddhartha Mahapatra for data-related assistance.

Notes

1 While micro-level studies on future orientation of children based on parents' behavior etc. (Webley and Nyhus 2006) have been studied, work on the effects of the future orientation of a nation are indeed scanty.