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Financial Intermediation and Macroeconomic Efficiency

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  • Yves Kuhry
  • Laurent Weill

    ()
    (Laboratoire de Recherche en Gestion et Economie, Institut d'Etudes Politiques, Strasbourg)

Abstract

This article evaluates whether financial intermediary development explains cross-country differences in macroeconomic efficiency. Stochastic frontier approach is applied at the aggregate level to estimate efficiency on a panel of 41 countries for the period 1991 to 1995. Generalized Method of Moments (GMM) dynamic panel techniques are then adopted to control for potential endogeneity of the regressors. We find evidence of a positive role of financial intermediary development on efficiency, with differences in terms of robustness according to the measure of financial intermediary development.

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Bibliographic Info

Paper provided by Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg in its series Working Papers of LaRGE Research Center with number 2008-03.

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Date of creation: 2008
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Handle: RePEc:lar:wpaper:2008-03

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Keywords: Financial development; income; aggregate productivity; efficiency.;

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References

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  1. Norman Loayza & Romain Ranciere, 2002. "Financial Development, Financial Fragility, and Growth," CESifo Working Paper Series 684, CESifo Group Munich.
  2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  3. Delorme, Charles Jr. & Thompson, Herbert Jr. & Warren, Ronald Jr., 1999. "Public Infrastructure and Private Productivity: A Stochastic-Frontier Approach," Journal of Macroeconomics, Elsevier, vol. 21(3), pages 563-576, July.
  4. Sanford Grossman & Oliver Hart, . "Corporate Financial Structure and Managerial Incentives," Rodney L. White Center for Financial Research Working Papers 21-79, Wharton School Rodney L. White Center for Financial Research.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  6. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  7. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  8. Rajan, Raghuram G, 1994. "Why Bank Credit Policies Fluctuate: A Theory and Some Evidence," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 399-441, May.
  9. Rioja, Felix & Valev, Neven, 2004. "Does one size fit all?: a reexamination of the finance and growth relationship," Journal of Development Economics, Elsevier, vol. 74(2), pages 429-447, August.
  10. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
  11. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  12. Philip Arestis & Georgios Chortareas & Evangelia Desli, 2006. "Financial Development And Productive Efficiency In Oecd Countries: An Exploratory Analysis," Manchester School, University of Manchester, vol. 74(4), pages 417-440, 07.
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Cited by:
  1. Laurent Gheeraert & Laurent Weill, 2014. "Does Islamic Banking Development Favour Macroeconomic Efficiency? Evidence on the Islamic Finance – Growth Nexus," Working Papers of LaRGE Research Center 2014-04, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  2. Banyár, József & Regős, Gábor, 2012. "Paradoxical price effects on insurance markets," Economic Modelling, Elsevier, vol. 29(4), pages 1399-1407.

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