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Regional growth and finance in Europe: Is there a quality effect of bank efficiency?

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Author Info
Hasan, Iftekhar () (Lally School of Management and Technology, USA, and Bank of Finland Research)
Koetter , Michael () (University of Groningen and Deutsche Bundesbank)
Wedow, Michael () (Deutsche Bundesbank)

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Abstract

In this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost- and profit-efficiency estimates as quality measures for financial institutions. Contrary to the usual quantitative proxies for financial development, the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds. An improvement in bank efficiency spurs five times more regional growth than does an identical increase in credit. More credit provided by efficient banks exerts an independent growth effect in addition to the direct quantity and quality channel effects.

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Publisher Info
Paper provided by Bank of Finland in its series Research Discussion Papers with number 13/2009.

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Length: 27 pages
Date of creation: 18 May 2009
Date of revision:
Handle: RePEc:hhs:bofrdp:2009_013

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.bof.fi/en/tutkimus
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Related research
Keywords: bank performance; regional growth; bank efficiency; Europe;

Other versions of this item:

Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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References listed on IDEAS
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    Other versions:
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    Other versions:
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