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Financial development and TFP growth: cross-country and industry-level evidence

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  • F. Arizala
  • E. Cavallo
  • A. Galindo

Abstract

This article estimates the impact of financial development on industry-level Total Factor Productivity (TFP) growth using a largely unexploited panel of 77 countries with data for 26 manufacturing industries for the years 1965 to 2003. A significant relationship is found between financial development and industry-level TFP growth when controlling for country-time and industry-time fixed effects. The results are both statistically and economically significant. TFP growth can accelerate up to 0.6% per year, depending on the external finance requirement of industries, following a one SD increase in financial development. The results are robust to different samples and specifications.

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File URL: http://hdl.handle.net/10.1080/09603107.2012.725931
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 23 (2013)
Issue (Month): 6 (March)
Pages: 433-448

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Handle: RePEc:taf:apfiec:v:23:y:2013:i:6:p:433-448

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Cited by:
  1. Becerra, O. & Cavallo, E. & Scartascini, C., 2012. "The politics of financial development: The role of interest groups and government capabilities," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 626-643.
  2. Misbah Tanveer Choudhry, 2013. "Age Dependency and Labor Productivity Divergence," Quaderni del Dipartimento di Economia, Finanza e Statistica 113/2013, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  3. Tiago Severo & Marcello M. Estevão, 2010. "Financial Shocks and TFP L4318Growth," IMF Working Papers 10/23, International Monetary Fund.
  4. Marcello M. Estevão & Tiago Severo, 2011. "Shocks, Financial Dependence, and Efficiency," IMF Working Papers 11/199, International Monetary Fund.

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