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Efficiency, depth and growth: Quantitative implications of finance and growth theory

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  • Trew, Alex

Abstract

We develop a parsimonious finance and endogenous growth model with microeconomic frictions in entrepreneurship and a role for credit constraints. We demonstrate that though an efficiency-growth relation will always exist, the efficiency-depth-growth relation may not. This has implications for the connection between the theory and empirics of finance and growth. We go on to ask whether the model can account for some historical trends in growth, financial depth and financial efficiency for the UK over the period 1850-1913. The best model of finance and growth is one that departs from the standard depth-growth link.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 4 (December)
Pages: 1550-1568

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:4:p:1550-1568

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Finance and growth Endogenous growth Economic history;

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References

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Cited by:
  1. Alessandro Giovannini & Maurizio Iacopetta & Raoul Minetti, 2013. "Financial markets, Banks, and Growth : disentangling the links," Documents de Travail de l'OFCE 2013-23, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Agustín Filippo, 2010. "Imperfectly Substitutable Financial Instruments in an Economic Development Model," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(57-58), pages 59-93, January -.

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