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Does financial intermediation matter for macroeconomic efficiency?

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  • Pierre-Guillaume Méon
  • Laurent Weill

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 ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 07-009.RS.

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Length: 22 p.
Date of creation: Apr 2007
Date of revision:
Publication status: Published by: Centre Emile Bernheim, Bruxelles
Handle: RePEc:sol:wpaper:07-009

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

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