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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:lsprsc:v:1:y:2008:i:2:p:147-157

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Web page: http://www.springer.com/economics/journal/12076

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

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References

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  1. 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.
  2. Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
  3. Philip Arestis & Ambika Luintel & Kul Luintel, 2004. "Does Financial Structure Matter?," Money Macro and Finance (MMF) Research Group Conference 2004 61, Money Macro and Finance Research Group.
  4. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "The Cost of Banking Regulation," Economics Working Papers ECO2007/43, European University Institute.
  5. David Roodman, 2003. "XTABOND2: Stata module to extend xtabond dynamic panel data estimator," Statistical Software Components S435901, Boston College Department of Economics, revised 28 Jul 2014.
  6. 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.
  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 Rancière, 2004. "Financial development, financial fragility and growth," Economics Working Papers 855, Department of Economics and Business, Universitat Pompeu Fabra.
  9. 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.
  10. 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.
  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. 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.
  13. Stefano Usai & Marco Vannini, 2005. "Banking structure and regional economic growth: lessons from Italy," The Annals of Regional Science, Springer, vol. 39(4), pages 691-714, December.
  14. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
  15. Andrea Vaona, 2008. "Regional evidence on financial development, finance term structure and growth," Empirical Economics, Springer, vol. 34(1), pages 185-201, February.
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Cited by:
  1. Adriano Giannola & Antonio Lopes & Alberto Zazzaro, 2013. "La convergenza dello sviluppo finanziario tra le regioni italiane dal 1890 ad oggi," Rivista di Politica Economica, SIPI Spa, issue 1, pages 145-197, January-M.
  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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