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Financial Development And Productive Efficiency In Oecd Countries: An Exploratory Analysis

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  • PHILIP ARESTIS
  • GEORGIOS CHORTAREAS
  • EVANGELIA DESLI

Abstract

The recent literature provides evidence for a positive relationship between financial deepening and growth but is quite silent on the exact channels through which it materializes. Theory suggests that production efficiency should be one of those main channels. We attempt to capture this channel by modeling productive efficiency explicitly and constructing efficiency frontiers using data envelopment analysis. We apply this procedure to consider whether financial development creates productive efficiency gains in the industrialized OECD countries. Our results show that financial development contributes to productive efficiency. However, this effect weakens over time during the period under scrutiny. Moreover, we find that the effects of financial deepening on productive efficiency depend on the degree of efficiency already achieved.

Suggested Citation

  • Philip Arestis & Georgios Chortareas & Evangelia Desli, 2006. "Financial Development And Productive Efficiency In Oecd Countries: An Exploratory Analysis," Manchester School, University of Manchester, vol. 74(4), pages 417-440, July.
  • Handle: RePEc:bla:manchs:v:74:y:2006:i:4:p:417-440
    DOI: 10.1111/j.1467-9957.2006.00502.x
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    1. Philip Arestis & Georgios Chortareas & Evangelia Desli, 2006. "Technical Efficiency and Financial Deepening in the non-OECD Economies," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 353-373.
    2. Ray,Subhash C., 2012. "Data Envelopment Analysis," Cambridge Books, Cambridge University Press, number 9781107405264, October.
    3. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, October.
    4. World Bank, 2001. "Finance for Growth : Policy Choices in a Volatile World," World Bank Publications - Books, The World Bank Group, number 13895, December.
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    Cited by:

    1. Mari Maté-Sánchez-Val & Antonia Madrid-Guijarro, 2011. "A spatial efficiency index proposal: an empirical application to SMEs productivity," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(2), pages 353-371, October.
    2. Nguena Christian Lambert & Tsafack Nanfosso Roger, 2014. "On the Sensitivity of Banking Activity Shocks: Evidence from the CEMAC Sub-region," Economics Bulletin, AccessEcon, vol. 34(1), pages 354-372.
    3. C.-H. DiMaria, 2019. "Sustainability, welfare and efficiency of nations," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(3), pages 1141-1163, May.
    4. Christian Lambert NGUENA & Roger TSAFACK NANFOSSO, 2014. "Macroeconomic Factors and Dynamics of Financial Deepening: An empirical Investigation applied to the CEMAC Sub-region," Research Africa Network Working Papers 14/015, Research Africa Network (RAN).
    5. Desli, Evangelia & Pelagidis, Theodore, 2012. "Greece's Sudden Faltering Economy: From Boom to Bust With special reference to the debt problem," MPRA Paper 106955, University Library of Munich, Germany.
    6. repec:agr:journl:v:1(618):y:2019:i:1(618):p:89-114 is not listed on IDEAS
    7. Danish Ahmed SIDDIQUI & Qazi Masood AHMED, 2019. "Exploring the role of institutions in cross country Malmquist productivity analysis: A two-stage double bootstrap DEA approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(621), W), pages 241-264, Winter.
    8. George M. von Furstenberg & Ulf von Kalckreuth, 2007. "Dependence on External Finance by Manufacturing Sector: Examining the Measure and its Properties," Economie Internationale, CEPII research center, issue 111, pages 55-80.
    9. BABATOUNDE, Latoundji Alain, 2010. "Efficiency of financial micro intermediation in the WAEMU countries: A stochastic frontier production analysis," MPRA Paper 33446, University Library of Munich, Germany, revised Aug 2011.
    10. Christian-Lambert Lambert Nguena & Roger Tsafack-Nanfosso, 2014. "On the Sensitivity of Banking Activity to Macroeconomic Shocks: Evidence from CEMAC Sub-region [Sensibilité du Secteur Bancaire aux Chocs Macroéconomiques: Cas de la sous-région CEMAC]," Post-Print halshs-01097850, HAL.
    11. repec:agr:journl:v:4(621):y:2019:i:4(621):p:241-264 is not listed on IDEAS
    12. Tochukwu Timothy Okoli & Ajibola Rhoda Oluwafisayomi, 2019. "Investigating the Banking Sector Development Transmission Mechanism of Financial Development to Growth: Evidence from Sub-Saharan Africa (SSA)," Journal of Economics and Behavioral Studies, AMH International, vol. 11(2), pages 120-131.
    13. Danish Ahmed SIDDIQUI & Qazi Masood AHMED, 2019. "Are institutions a crucial determinant of cross country economic efficiency? A two-stage double bootstrap data envelopment analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(618), S), pages 89-114, Spring.
    14. Philip Arestis & Georgios Chortareas & Evangelia Desli, 2006. "Technical Efficiency and Financial Deepening in the non-OECD Economies," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 353-373.
    15. Christian Lambert Nguena & Roger Tsafack Nanfosso, 2013. "What Drives and Limits Financial Deepening Dynamics? Fresh Empirical-based Policy Lessons for African Sub-Regions," AAYE Policy Research Working Paper Series 13_003, Association of African Young Economists, revised Nov 2013.
    16. Yves Kuhry & Laurent Weill, 2010. "Financial intermediation and macroeconomic efficiency," Applied Financial Economics, Taylor & Francis Journals, vol. 20(15), pages 1185-1193.
    17. Rouven E. Haschka & Helmut Herwartz & Clara Silva Coelho & Yabibal M. Walle, 2023. "The impact of local financial development and corruption control on firm efficiency in Vietnam: evidence from a geoadditive stochastic frontier analysis," Journal of Productivity Analysis, Springer, vol. 60(2), pages 203-226, October.
    18. Aysan, Ahmet Faruk & Ertek, Gurdal & Ozturk, Secil, 2009. "Assessing the adverse effects of interbank funds on bank efficiency through using semiparametric and nonparametric methods," MPRA Paper 38113, University Library of Munich, Germany.
    19. Christian Lambert Nguena & Roger Tsafack Nanfosso, 2013. "Financial Deepening Dynamics and Implication for Financial Policy Coordination in a Monetary Union: the case of WAEMU," AAYE Policy Research Working Paper Series 13_005, Association of African Young Economists, revised Nov 2013.

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