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Does Financial Intermediation Matter for macroeconomic Efficiency ?

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Author Info
Pierre-Guillaume Méon
Laurent Weill () (Laboratoire de Recherche en Gestion et Economie, Institut d'Etudes Politiques, Strasbourg)

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Abstract

This paper investigates whether financial intermediary development influences macroeconomic technical efficiency on a sample of 47 countries, both developed and developing, over 1980-1995. We do so by applying Battese and Coelli (1995)’s method at the aggregate level. It is found that financial intermediary development, except financial depth, is on average associated with more efficiency. However we find strong evidence that this relationship is conditional on the level of economic development. The lower economic development the weaker is the impact of financial development on efficiency. That impact can even become negative in the poorest countries.

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Paper provided by Laboratoire de Recherche en Gestion et Economie, Université Louis Pasteur, Strasbourg (France) in its series Working Papers of LaRGE (Laboratoire de Recherche en Gestion et Economie) with number 2008-05.

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Date of creation: 2008
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Handle: RePEc:lar:wpaper:2008-05

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Related research
Keywords: Financial development income aggregate productivity efficiency.

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
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

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