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Finance and economic growth - a review of theory and the available evidence

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  • Michael Thiel
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    Abstract

    The EU's structural reform agenda attaches a considerable weight to the establishment of efficiently working and integrated EU financial markets. While there is a firm consensus that a well-functioning financial sector is a precondition for the efficient allocation of resources and the exploitation of an economy's growth potential, the economic literature is less consensual on how and to what extent finance affects economic growth. This paper reviews the economic theory and available evidence with particular focus on three questions: how does financial development affect economic growth; what are the features of a growth supportive financial structure; how are financial structures related to structural change and technical progress?Â

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    File URL: http://ec.europa.eu/economy_finance/publications/publication884_en.pdf
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    Bibliographic Info

    Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 158.

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    Length: 50 pages
    Date of creation: Jul 2001
    Date of revision:
    Handle: RePEc:euf:ecopap:0158

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    Keywords: financial development; economic growth; financial structures; structural change; technical progress;

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    Cited by:
    1. Tuuli Koivu, 2002. "Do efficient banking sectors accelerate economic growth in transition countries?," Macroeconomics 0212013, EconWPA.
    2. Panagiotis Staikouras & Christos Staikouras & Maria-Eleni Agoraki, 2007. "The effect of board size and composition on European bank performance," European Journal of Law and Economics, Springer, vol. 23(1), pages 1-27, February.
    3. Christoph Walkner & Jean-Pierre Raes, 2005. "Integration and consolidation in EU banking - an unfinished business," European Economy - Economic Papers 226, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    4. Koivu, Tuuli, 2002. "Do efficient banking sectors accelerate economic growth in transition countries," BOFIT Discussion Papers 14/2002, Bank of Finland, Institute for Economies in Transition.
    5. António Afonso & Raquel Ferreira & Edmund Freitas & Celso Nóbrega & José Pinheiro, 2003. "Intermediaries, Financial Markets and Growth: Some more International Evidence," Working Papers Department of Economics 2003/02, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
    6. Koetter, Michael & Wedow, Michael, 2005. "Finance and growth in a bank-based economy: is it quantity or quality that matters?," Discussion Paper Series 2: Banking and Financial Studies 2006,02, Deutsche Bundesbank, Research Centre.
    7. Liliane Karlinger, 2002. "The Impact of Common Currencies on Financial Markets: A Literature Review and Evidence from the Euro Area," Working Papers 02-35, Bank of Canada.
    8. Tuuli Koivu & Pekka Sutela, 2005. "Financial Systems in Transition: Could Small Actually Be Beautiful?," Eastern Economic Journal, Eastern Economic Association, vol. 31(2), pages 265-283, Spring.
    9. Mariani, Fabio & Padoan, Pierre Carlo, 2003. "The Growth-Finance Nexus and European Integration: A Macroeconomic Perspective," EIFC - Technology and Finance Working Papers 23, United Nations University, Institute for New Technologies.

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