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

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Author Info
Trew, Alex

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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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File URL: http://www.sciencedirect.com/science/article/B6X4M-4RFSCRT-1/2/039fad3adbaa540e8c9e70b867a43e7f
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Publisher 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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Related research
Keywords: Finance and growth Endogenous growth Economic history;

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  2. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December. [Downloadable!] (restricted)
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  9. Beck, Thorsten & Demirguc-Kunt, Asli & Laeven, Luc & Levine, Ross, 2005. "Finance, firm size, and growth," Policy Research Working Paper Series 3485, The World Bank. [Downloadable!]
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  10. Alex Trew, 2006. "Finance and Growth: A Critical Survey," The Economic Record, The Economic Society of Australia, vol. 82(259), pages 481-490, December. [Downloadable!] (restricted)
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  11. Robert M. Townsend & Kenichi Ueda, 2006. "Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation-super-1," Review of Economic Studies, Blackwell Publishing, vol. 73(1), pages 251-293, 01. [Downloadable!] (restricted)
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  15. Blackburn, Keith & Hung, Victor T Y, 1998. "A Theory of Growth, Financial Development and Trade," Economica, London School of Economics and Political Science, vol. 65(257), pages 107-24, February. [Downloadable!] (restricted)
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  20. Morales, Mar a F., 2003. "Financial Intermediation In A Model Of Growth Through Creative Destruction," Macroeconomic Dynamics, Cambridge University Press, vol. 7(03), pages 363-393, June. [Downloadable!]
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  23. John Driffill, 2003. "Growth and Finance," Manchester School, University of Manchester, vol. 71(4), pages 363-380, 07. [Downloadable!] (restricted)
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  25. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
    Other versions:
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