Comments and Questions

Thank you very much for your comments Dr. Chee-Hong Law.1. We have corrected the minor typo error in Equation 4 in our revised manuscript2. In the original manuscript, we actually conducted a non-linearity test between financial development and GDP using the U-test proposed by Lind and Mehlun (2010), but we didn’t comment on it due to want of space. Based on your comment, we have now commented on the U-test result with a footnote in the revised manuscript.3. The statement on P.10 is correct because it refers to Column 3 in middle income and low income panels where the coefficient of linear GDP is negative and the coefficient of GDP squared is positive. However, for clarity sake, we add the explanation for high income group where the coefficient of the linear GDP is positive and the coefficient of GDP squared is negative.4. The coefficient of the interaction term is negative and significant in middle income countries by insignificant in high and low income countries. This is highlighted in the paper.5. We have made it clearer in the revised manuscript that the results of the robustness checks are similar to the results obtained with private sector credit in terms of sign and significance.6. We have also clarified that although there is no robust evidence of a non-linear relationship between GDP and financial development in the heterogeneous panels, we found some evidences of non-linear relationships in some countries.7. In the revised manuscript, we have added a new section on "Discussion and Policy Implications" where we strengthened the discussion on our findings and the policy implications of the study. Once again, thank you Dr. Chee-Hong Law.