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An Empirical Test Of The Interaction Between Regional Financial Markets And Regional Growth

Author

Listed:
  • Orley M. Amos

    (Oklahoma State University)

  • Majid Kermani

    (ECI Export-Import Co.)

  • John R. Wingender

    (Oklahoma State University)

Abstract

Two models of the interaction between regional financial markets and regional production are examined. The first assumes that regional expenditures are determined by the regional interest rate, analogous to national IS-LM macroeconomic models. The second assumes that regional expenditures are constrained by the availability of regional credit available through financial markets. The first model implies regional financial markets have no effect on regional growth if financial capital is perfectly mobile. However, the second model indicates regional growth is affected by regional financial markets. This difference is tested using gross product and commercial bank loan data for states from 1965 to 1985. A two-step procedure is used that (1) estimates the structural coefficients for each state through time series analysis, then (2) tests the explanatory power of these coefficients in a cross-section analysis of state growth rates. This analysis indicates that regional financial markets exhibit a positive impact on regional growth.

Suggested Citation

  • Orley M. Amos & Majid Kermani & John R. Wingender, 1994. "An Empirical Test Of The Interaction Between Regional Financial Markets And Regional Growth," The Review of Regional Studies, Southern Regional Science Association, vol. 24(1), pages 55-69, Summer.
    • Handle: RePEc:rre:publsh:v24:y:1994:i:1:p:55-69
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    References listed on IDEAS

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    1. C. C. Agu, 1986. "Financial Institutions and Economic Development: The Experience of Nigeria," South African Journal of Economics, Economic Society of South Africa, vol. 54(3), pages 203-210, September.
    2. Amos, Orley Jr & Wingender, John R., 1993. "A model of the interaction between regional financial markets and regional growth," Regional Science and Urban Economics, Elsevier, vol. 23(1), pages 85-110, March.
    3. Charles B. Garrison & Hui S. Chang, 1979. "The Effect of Monetary and Fiscal Policies on Regional Business Cycles," International Regional Science Review, , vol. 4(2), pages 167-180, December.
    4. Sheila C. Dow, 2008. "Monetary Policy," Chapters, in: John B. Davis & Wilfred Dolfsma (ed.), The Elgar Companion to Social Economics, chapter 26, Edward Elgar Publishing.
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