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Changes in the relationship between the financial and the real sector and the present financial crisis in the European Union

Author

Listed:
  • Amaia Altuzarra

    (Department of Applied Economics V, University of the Basque Country UPV/EHU)

  • Patricia Peinado

    (Department of Applied Economics V, University of the Basque Country UPV/EHU)

  • Carlos Rodriguez

    (Department of Applied Economics V, University of the Basque Country UPV/EHU)

  • Felipe Serrano

    (Department of Applied Economics V, University of the Basque Country UPV/EHU)

Abstract

In the first part of the paper we confirm the existence of a financial “vanishing effect” for the Eurozone countries since the 90s. In the 70s and 80s -when credit over GDP was still moderate- credit growth still had a positive effect on real growth, but thereafter during the financialization heydays when credit reached a high level, that link broke apart. In the second part we put forward that a main reason explaining why increasing financial deepening stopped to have a positive effect on growth might be due to NFCs having used an important part of their external resources for the acquisition of securities instead of financing real investment. This process of NFC finacialization and the observed increase in their selffinancing ability are two key reassuring indicators showing the disconnection of NFC financial behaviour with their investment decisions

Suggested Citation

  • Amaia Altuzarra & Patricia Peinado & Carlos Rodriguez & Felipe Serrano, 2016. "Changes in the relationship between the financial and the real sector and the present financial crisis in the European Union," Working papers wpaper159, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    • Handle: RePEc:fes:wpaper:wpaper159
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    Cited by:

    1. Vít Pošta & Aziya Mukusheva & Nurilya Kuchukova, 2022. "Economic Performance and Financial Stability: Case of the Eurasian Economic Union," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 70(1), pages 22-35, January.
    2. Vít Pošta & Aziya Mukusheva & Nurilya Kuchukova, 2022. "Economic Performance and Financial Stability: Case of the Eurasian Economic Union," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 1(1), pages 22-35, January.

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    More about this item

    Keywords

    bank credit; economic growth; NFC financing gap; NFC investment;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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