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Efficiency, Depth and Growth: Quantitative Implications of Finance and Growth Theory

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  • Alex Trew

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Abstract

We develop a parsimonious finance and endogenous growth model with microeconomic frictions in entrepreneurship and a role for credit constraints. We demonstrate that though an efficiency-growth relation will always exist, the efficiency-depth-growth relation may not. This has implications for the connection between the theory and empirics of finance and growth. We go on to ask whether the model can account for some historical trends in growth, financial depth and financial efficiency for the UK over the period 1850--1913. The best model of finance and growth is one that departs from the standard depth-growth link.

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File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/wp0712.pdf
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Bibliographic Info

Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 200712.

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Date of creation: 15 Jul 2007
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Handle: RePEc:san:cdmawp:0712

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Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
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Web page: http://www.st-andrews.ac.uk/cdma
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Keywords: finance and growth; endogenous growth; economic history.;

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Cited by:
  1. Maurizio Iacopetta & Alessandro Giovannini & Raoul Minetti, 2013. "Financial Markets Banks and Growth disentangling the links," Sciences Po Economics Discussion Papers 2013-13, Sciences Po Departement of Economics.
  2. Agustín Filippo, 2010. "Imperfectly Substitutable Financial Instruments in an Economic Development Model," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(57-58), pages 59-93, January -.

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