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New empirical evidence on local financial development and growth

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  • Andrea Vaona

    ()

  • Roberto Patuelli

Abstract

In this paper, we show that the regional finance-growth nexus in Italy is robust to a series of innovations with respect to the existing literature on the topic. We use finer measures of economic and financial development, as well as instruments with a deeper economic content. We rely on state-of-the-art cross-sectional and panel estimation methods, and we offer a thorough investigation of the nonlinearities in the relation between finance and growth. Our results show that, while local financial development is a key factor for economic growth, in regions with inefficient courts more credit might translate into reduced growth due to opportunistic behaviour and the consequent misallocation of funds.

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File URL: http://hdl.handle.net/10.1007/s12076-008-0014-4
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Bibliographic Info

Article provided by Springer in its journal Letters in Spatial and Resource Sciences.

Volume (Year): 1 (2008)
Issue (Month): 2 (December)
Pages: 147-157

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Handle: RePEc:spr:astaws:v:1:y:2008:i:2:p:147-157

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Web page: http://www.springerlink.com/content/120614/

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Related research

Keywords: Finance; Growth; Regions; Italy; Cross-section analysis; Panel data analysis; O18; O16; C31;

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References

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  1. Beck, T.H.L. & Levine, R. & Loayza, N., 2000. "Financial intermediation and growth: Causality and causes," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125519, Tilburg University.
  2. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2000. "The Role of Social Capital In Financial Development," CEPR Discussion Papers 2383, C.E.P.R. Discussion Papers.
  3. S. Usai & M. Vannini, 2004. "Banking structure and Regional Economic Growth: lessons from Italy," Working Paper CRENoS 200417, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  4. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  5. Magda Bianco & Tullio Jappelli & Marco Pagano, 2001. "Courts and Banks: Effects of Judicial Enforcement on Credit Markets," CSEF Working Papers 58, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Apr 2002.
  6. Philip Arestis & Ambika D. Luintel & Kul B. Luintel, 2004. "Does Financial Structure Matter?," Economics Working Paper Archive wp_399, Levy Economics Institute.
  7. Fabiani, S. & Pellegrini, G., 1997. "Education, Infrastructure, Geography and Growth: An Empirical Analysis of the Development of Italian Provinces," Papers 323, Banca Italia - Servizio di Studi.
  8. Norman Loayza & Romain Ranciere, 2002. "Financial Development, Financial Fragility, and Growth," Working Papers Central Bank of Chile 145, Central Bank of Chile.
  9. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
  10. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "The Cost of Banking Regulation," NBER Working Papers 12501, National Bureau of Economic Research, Inc.
  11. Guariglia, Alessandra & Poncet, Sandra, 2008. "Could financial distortions be no impediment to economic growth after all? Evidence from China," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 633-657, December.
  12. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "Does Local Financial Development Matter?," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 929-969, August.
  13. Nicholas Apergis & Ioannis Filippidis & Claire Economidou, 2007. "Financial Deepening and Economic Growth Linkages: A Panel Data Analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(1), pages 179-198, April.
  14. Andrea Vaona, 2008. "Regional evidence on financial development, finance term structure and growth," Empirical Economics, Springer, vol. 34(1), pages 185-201, February.
  15. David Roodman, 2003. "XTABOND2: Stata module to extend xtabond dynamic panel data estimator," Statistical Software Components S435901, Boston College Department of Economics, revised 09 Aug 2014.
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Citations

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Cited by:
  1. Adriano Giannola & Antonio Lopes & Alberto Zazzaro, 2012. "La convergenza dello sviluppo finanziario tra le regioni italiane dal 1890 ad oggi," Mo.Fi.R. Working Papers 74, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Swamy, Vighneswara, 2010. "Bank-based Financial Intermediation for Financial Inclusion and Inclusive Growth," MPRA Paper 47510, University Library of Munich, Germany.

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