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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. Copyright Blackwell Publishing Ltd and The University of Manchester 2006.

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Bibliographic Info

Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 74 (2006)
Issue (Month): 4 (07)
Pages: 417-440

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Handle: RePEc:bla:manchs:v:74:y:2006:i:4:p:417-440

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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, Springer, vol. 47(2), pages 353-371, October.
  2. George von Furstenberg & Ulf von Kalckreuth, 2007. "Dependence on External Finance by Manufacturing Sector: Examining the Measure and its Properties," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2007-001, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  3. 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.
  4. Yves Kuhry & Laurent Weill, 2010. "Financial intermediation and macroeconomic efficiency," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(15), pages 1185-1193.
  5. 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, Taylor & Francis Journals, vol. 20(3), pages 353-373.
  6. 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.
  7. 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.

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