The quality of banking and regional growth
AbstractWe test whether output growth in European economic agglomeration regions depends on financial development. To this end we suggest a relative measure of the quality of financial institutions rather than the usual quantity proxy of financial development. In order to measure the quality of financial development we use profit efficiency derived from stochastic frontier analysis. We show that more efficient banks spur regional growth while the typically used quantity measure of financial development is negligible. Also, our results suggest an additional channel through which better banking can spur growth: the interaction of more credit with efficient banks. --
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Bibliographic InfoPaper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2007,10.
Date of creation: 2007
Date of revision:
Bank performance; regional growth; bank efficiency; Europe;
Find related papers by JEL classification:
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-20 (All new papers)
- NEP-BAN-2007-10-20 (Banking)
- NEP-EEC-2007-10-20 (European Economics)
- NEP-EFF-2007-10-20 (Efficiency & Productivity)
- NEP-FDG-2007-10-20 (Financial Development & Growth)
- NEP-GEO-2007-10-20 (Economic Geography)
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- Soedarmono, Wahyoe & Augier, Laurent, 2009.
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