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This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We use different empirical approaches to show that there can indeed be "too much" finance. In particular, our results suggest that finance starts having a negative effect on output growth when credit to the private sector reaches 100% of GDP. We show that our results are consistent with the "vanishing effect" of financial development and that they are not driven by output volatility, banking crises, low institutional quality, or by differences in bank regulation and supervision.

Business & Economics --- Economic Theory --- Finance. --- Economic development. --- Development, Economic --- Economic growth --- Growth, Economic --- Funding --- Funds --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- Currency question --- Banks and Banking --- Finance: General --- Money and Monetary Policy --- Industries: Financial Services --- General Financial Markets: General (includes Measurement and Data) --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Financial Aspects of Economic Integration --- Economic Growth and Aggregate Productivity: General --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Institutions and Services: General --- Financial Institutions and Services: Government Policy and Regulation --- Financial Markets and the Macroeconomy --- Financial Crises --- Monetary economics --- Financial services law & regulation --- Finance --- Economic & financial crises & disasters --- Credit --- Financial sector --- Bank supervision --- Financial sector development --- Banking crises --- Money --- Economic sectors --- Financial regulation and supervision --- Financial markets --- Financial crises --- Financial services industry --- Banks and banking --- State supervision --- United States