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Financial Dependence and Growth

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  • RAGHURAM G. RAJAN
  • LUIGI ZINGALES

Abstract

This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of external finance to firms. Specifically, the authors ask whether industrial sectors that are relatively more in need of external finance develop disproportionately faster in countries with more-developed financial markets. They find this to be true in a large sample of countries over the 1980s. The authors show this result is unlikely to be driven by omitted variables, outliers, or reverse causality. Copyright 1998 by American Economic Association.

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Paper provided by Center for Research in Security Prices, Graduate School of Business, University of Chicago in its series CRSP working papers with number 344.

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Handle: RePEc:wop:chispw:344

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  24. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
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  1. La nuova rivoluzione liberaloide
    by Francesco Sylos Labini in ROARS - Return on Academic Research on 2012-10-04 16:04:59
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