IDEAS home Printed from https://ideas.repec.org/a/pal/compes/v60y2018i1d10.1057_s41294-017-0046-0.html
   My bibliography  Save this article

Growth and Inequality Effects of Decades of Financial Transformation in OECD Countries

Author

Listed:
  • Boris Cournède

    (OECD Economics Department)

  • Catherine L. Mann

    (ECO/PED, OECD Economics Department)

Abstract

Finance has massively expanded and deeply changed across OECD countries over the past 50 years. Rapid growth of finance has been accompanied by a debt shift away from business towards household credit and, after 2000, a withering of equity capital. Econometric investigations indicate that these changes have contributed to slowing down potential growth. In OECD countries, higher credit/GDP ratios imply slower trend growth, especially when lending goes to households; by contrast, additional stockmarket funding boosts growth. Moreover, these trends have contributed to widening inequalities. There is a case for policymakers to focus on macro-prudential policy tools that optimise growth-stability trade-offs.

Suggested Citation

  • Boris Cournède & Catherine L. Mann, 2018. "Growth and Inequality Effects of Decades of Financial Transformation in OECD Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 3-14, March.
    • Handle: RePEc:pal:compes:v:60:y:2018:i:1:d:10.1057_s41294-017-0046-0
    DOI: 10.1057/s41294-017-0046-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41294-017-0046-0
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41294-017-0046-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Peter L. Rousseau & Paul Wachtel, 2011. "What Is Happening To The Impact Of Financial Deepening On Economic Growth?," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 276-288, January.
    2. Jean Arcand & Enrico Berkes & Ugo Panizza, 2015. "Too much finance?," Journal of Economic Growth, Springer, vol. 20(2), pages 105-148, June.
    3. Oliver Denk & Boris Cournède, 2015. "Finance and income inequality in OECD countries," OECD Economics Department Working Papers 1224, OECD Publishing.
    4. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.
    5. Boris Cournède & Oliver Denk, 2015. "Finance and economic growth in OECD and G20 countries," OECD Economics Department Working Papers 1223, OECD Publishing.
    6. Oliver Denk & Sebastian Schich & Boris Cournède, 2015. "Why implicit bank debt guarantees matter: Some empirical evidence," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2014(2), pages 63-88.
    7. Oliver Denk, 2015. "Financial sector pay and labour income inequality: Evidence from Europe," OECD Economics Department Working Papers 1225, OECD Publishing.
    8. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
    9. Stephen Cecchetti & Enisse Kharroubi, 2012. "Reassessing the impact of finance on growth," BIS Working Papers 381, Bank for International Settlements.
    10. Sebastian Schich & Yesim Aydin, 2014. "Measurement and analysis of implicit guarantees for bank debt: OECD survey results," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2014(1), pages 39-67.
    11. Robin Greenwood & David Scharfstein, 2013. "The Growth of Finance," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 3-28, Spring.
    12. Oliver Denk & Alexandre Cazenave-Lacroutz, 2015. "Household finance and income inequality in the euro area," OECD Economics Department Working Papers 1226, OECD Publishing.
    13. Aida Caldera Sánchez & Alain de Serres & Filippo Gori & Mikkel Hermansen & Oliver Röhn, 2017. "Strengthening economic resilience: Insights from the post-1970 record of severe recessions and financial crises," OECD Economic Policy Papers 20, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.
    2. Benczúr, Péter & Karagiannis, Stelios & Kvedaras, Virmantas, 2019. "Finance and economic growth: Financing structure and non-linear impact," Journal of Macroeconomics, Elsevier, vol. 62(C).
    3. Aida Caldera Sánchez & Alain de Serres & Filippo Gori & Mikkel Hermansen & Oliver Röhn, 2017. "Strengthening economic resilience: Insights from the post-1970 record of severe recessions and financial crises," OECD Economic Policy Papers 20, OECD Publishing.
    4. Oliver Denk & Boris Cournède, 2015. "Finance and income inequality in OECD countries," OECD Economics Department Working Papers 1224, OECD Publishing.
    5. Gunther Capelle-Blancard & Claire Labonne, 2016. "More Bankers, More Growth? Evidence from OECD Countries," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 45(1), pages 37-51, February.
    6. Bofinger, Peter & Geißendörfer, Lisa & Haas, Thomas & Mayer, Fabian, 2021. "Discovering the True Schumpeter - New Insights into the Finance and Growth Nexus," CEPR Discussion Papers 16851, C.E.P.R. Discussion Papers.
    7. Emmanuel Carré & Guillaume L’œillet, 2018. "The Literature on the Finance–Growth Nexus in the Aftermath of the Financial Crisis: A Review," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 161-180, March.
    8. Ugo Panizza, 2018. "Nonlinearities in the Relationship Between Finance and Growth," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 44-53, March.
    9. Ajai Chopra, 2015. "Financing Productivity- and Innovation-Led Growth in Developing Asia: International Lessons and Policy Issues," Working Paper Series WP15-6, Peterson Institute for International Economics.
    10. Emmanuel Carré & Guillaume L’Œillet, 2017. "Une revue de la littérature récente sur le nexus finance-croissance après la crise : apports, limites et pistes de recherche," Revue d'économie financière, Association d'économie financière, vol. 0(3), pages 271-290.
    11. Mikhail Stolbov, 2017. "Causality between credit depth and economic growth: evidence from 24 OECD countries," Empirical Economics, Springer, vol. 53(2), pages 493-524, September.
    12. Loayza,Norman V. & Ouazad,Amine & Ranciere,Romain, 2017. "Financial development, growth, and crisis: is there a trade-off ?," Policy Research Working Paper Series 8237, The World Bank.
    13. Oliver Denk & Sebastian Schich & Boris Cournède, 2015. "Why implicit bank debt guarantees matter: Some empirical evidence," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2014(2), pages 63-88.
    14. Lo Turco, Alessia & Maggioni, Daniela & Zazzaro, Alberto, 2019. "Financial dependence and growth: The role of input-output linkages," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 308-328.
    15. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    16. repec:zbw:bofitp:urn:nbn:fi:bof-201505061169 is not listed on IDEAS
    17. Jérôme Creel & Paul Hubert & Fabien Labondance, 2017. "Financialisation risks and economic performance," SciencePo Working papers Main hal-03471756, HAL.
    18. Botta, Alberto & Caverzasi, Eugenio & Russo, Alberto, 2022. "When complexity meets finance: A contribution to the study of the macroeconomic effects of complex financial systems," Research Policy, Elsevier, vol. 51(8).
    19. Chu, Lan Khanh & Chu, Hung Viet, 2020. "Is too much liquidity harmful to economic growth?," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 230-242.
    20. Michiel Bijlsma & Andrei Dubovik, 2014. "Banks, Financial Markets and Growth in Developed Countries: a Survey of the empirical literature," CPB Discussion Paper 266, CPB Netherlands Bureau for Economic Policy Analysis.
    21. Gächter, Martin & Gkrintzalis, Ioannis, 2017. "The finance–trade nexus revisited: Is the global trade slowdown also a financial story?," Economics Letters, Elsevier, vol. 158(C), pages 21-25.

    More about this item

    Keywords

    Finance; Growth; Inequality; Credit; Equity;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:compes:v:60:y:2018:i:1:d:10.1057_s41294-017-0046-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.