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Finance and the sources of growth

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  • Beck, Thorsten
  • Levine, Ross
  • Loayza, Norman

Abstract

The authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources-total factor productivity growth, physical capital accumulation, and private saving. They use (1) a pure cross-country instrumental variable estimator to extract the exogenous component of banking development and (2) a new panel technique that controls for country-specific effects and endogeneity. They find that: Banks do exert a large, causal impact on total factor productivity growth, which feeds through to overall GDP (Gross Domestic Product) growth. The long-run links between banking development and both capital growth and private savings are more tenuous.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2057.

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Date of creation: 28 Feb 1999
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Handle: RePEc:wbk:wbrwps:2057

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Related research

Keywords: Economic Theory&Research; Banks&Banking Reform; Fiscal&Monetary Policy; Environmental Economics&Policies; Decentralization; Economic Theory&Research; Banks&Banking Reform; Achieving Shared Growth; Economic Growth; Governance Indicators;

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References

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