IDEAS home Printed from https://ideas.repec.org/a/bas/econth/y2009i7p38-66.html
   My bibliography  Save this article

The Interaction between the Banking System and the Real Economy (Part One: Theory and Methodology)

Author

Listed:
  • Stati Statev

Abstract

This article focuses the attention on the analysis of the banking dynamics and the impact on the development of the real sector due to the dominant role of the banking system in the financial sector. The main objective is to derive and argue the theoretical and methodological approach in the study of the interrelations between the banking system and the real economy in a single country and on this basis to study the interdependence and the causal relation between the dynamics of the banking sector and the real sector in Bulgaria in the long and short run, in order to distinguish the basic transmission mechanisms between them and to make a general assessment of the state of the financial system both for the entire transition period, as well as within the two specific periods before and after the introduction of the Currency Board. The first part presents an explanation of the theory and methodology of this analysis. The specific results from the recent empirical analysis of the banking system and the real economy in Bulgaria shall be outlined in the second article.

Suggested Citation

  • Stati Statev, 2009. "The Interaction between the Banking System and the Real Economy (Part One: Theory and Methodology)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 38-66.
  • Handle: RePEc:bas:econth:y:2009:i:7:p:38-66
    as

    Download full text from publisher

    File URL: http://www.ceeol.com/aspx/issuedetails.aspx?issueid=2861e798-4357-421b-bb2c-574250228319&articleid=021c8a44-4858-4c60-962a-fee72f126542#a021c8a44-4858-4c60-962a-fee72f126542
    Download Restriction: Fee access
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Abu-Bader, Suleiman & Abu-Qarn, Aamer, 2005. "Financial Development and Economic Growth: Time Series Evidence from Egypt," MPRA Paper 1113, University Library of Munich, Germany.
    2. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Market Development and Financial Intermediaries: Stylized Facts," World Bank Economic Review, World Bank Group, vol. 10(2), pages 291-321, May.
    3. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    4. Tadesse, Solomon, 2002. "Financial Architecture and Economic Performance: International Evidence," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 429-454, October.
    5. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
    6. Ernst-Ludwig von Thadden, 1995. "Long-Term Contracts, Short-Term Investment and Monitoring," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 557-575.
    7. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer, 2000. "Government Ownership of Banks," Harvard Institute of Economic Research Working Papers 1890, Harvard - Institute of Economic Research.
    8. Abu-Bader, Suleiman & Abu-Qarn, Aamer, 2005. "Financial Development and Economic Growth: Time Series Evidence from Egypt," MPRA Paper 1113, University Library of Munich, Germany.
    9. Gupta, Kanhaya L, 1987. "Aggregate Savings, Financial Intermediation, and Interest Rate," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 303-311, May.
    10. Gerhard Fink & Peter Haiss & Goran Vuksic, 2006. "Importance of Financial Sectors for Growth in Accession Countries," Chapters, in: Klaus Liebscher & Josef Christl & Peter Mooslechner & Doris Ritzberger-Grünwald (ed.), Financial Development, Integration and Stability, chapter 11, Edward Elgar Publishing.
    11. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633.
    12. Drakos, Kostas, 2003. "Assessing the success of reform in transition banking 10 years later: an interest margins analysis," Journal of Policy Modeling, Elsevier, vol. 25(3), pages 309-317, April.
    13. Levine, Ross, 2002. "Bank-Based or Market-Based Financial Systems: Which Is Better?," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 398-428, October.
    14. Arestis, Philip & Demetriades, Panicos O, 1997. "Financial Development and Economic Growth: Assessing the Evidence," Economic Journal, Royal Economic Society, vol. 107(442), pages 783-799, May.
    15. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    16. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    17. Allen, Franklin & Gale, Douglas, 1997. "Financial Markets, Intermediaries, and Intertemporal Smoothing," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 523-546, June.
    18. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    19. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    20. Bencivenga, Valerie R. & Smith, Bruce D., 1993. "Some consequences of credit rationing in an endogenous growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 97-122.
    21. Greenwood, Jeremy & Smith, Bruce D., 1997. "Financial markets in development, and the development of financial markets," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 145-181, January.
    22. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084, Central Bank of Chile.
    23. Ross Levine, 1998. "The legal environment, banks, and long-run economic growth," Proceedings, Federal Reserve Bank of Cleveland, issue Aug, pages 596-620.
    24. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    25. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
    26. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    27. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
    28. Ang, James B. & McKibbin, Warwick J., 2007. "Financial liberalization, financial sector development and growth: Evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 84(1), pages 215-233, September.
    29. Rousseau, Peter L. & Wachtel, Paul, 2002. "Inflation thresholds and the finance-growth nexus," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 777-793, November.
    30. Andrus Oks, 2001. "Efficiency Of The Financial Intermediaries And Economic Growth In Ceec," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 8, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    31. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    32. Panicos Demetriades & Svetlana Andrianova, "undated". "Finance and Growth: What We Know and What We Need To Know," Discussion Papers in Economics 03/15, Division of Economics, School of Business, University of Leicester.
    33. Ross Levine, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
    34. Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-152, May.
    35. Graff, Michael & Karmann, Alexander, 2003. "What determines the finance-growth nexus? An endogenous growth model and empirical evidence," Dresden Discussion Paper Series in Economics 15/03, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    36. David E. Weinstein & Yishay Yafeh, 1998. "On the Costs of a Bank-Centered Financial System: Evidence from the Changing Main Bank Relations in Japan," Journal of Finance, American Finance Association, vol. 53(2), pages 635-672, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stati Statev, 2009. "The Interaction between the Banking System and the Real Economy (Part One: Theory and Methodology)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 3-28.
    2. Statty Stattev, 2009. "Interactions between Financial Development and Economic Growth: Theoretical Approaches and Solutions," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 55-79.
    3. James B. Ang, 2007. "A Survey Of Recent Developments In The Literature Of Finance And Growth," Monash Economics Working Papers 03-07, Monash University, Department of Economics.
    4. Siddiki, Jalal Uddin & Auerbach, Paul, 2000. "Economic development, finance and liberalisation: a survey and some unresolved issues," Economics Discussion Papers 2000-6, School of Economics, Kingston University London.
    5. Koetter, Michael & Wedow, Michael, 2010. "Finance and growth in a bank-based economy: Is it quantity or quality that matters?," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1529-1545, December.
    6. Carton, Christine & Ronquillo, Cely, 2008. "Determinantes del crecimiento económico e intermediación bancaria: un análisis empírico para países latinoamericanos [Determinants of economic growth and bank intermediation: empirical analysis for," MPRA Paper 15514, University Library of Munich, Germany, revised 25 Nov 2008.
    7. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
    8. Gehringer, Agnieszka, 2013. "Financial liberalization, financial development and productivity growth: An overview," Economics Discussion Papers 2013-46, Kiel Institute for the World Economy (IfW).
    9. Maswana, Jean-Claude, 2006. "An empirical investigation around the finance-growth puzzle in China with a particular focus on causality and efficiency considerations," MPRA Paper 3946, University Library of Munich, Germany, revised Apr 2006.
    10. Ndikumana, Leonce, 2005. "Financial development, financial structure, and domestic investment: International evidence," Journal of International Money and Finance, Elsevier, vol. 24(4), pages 651-673, June.
    11. Alessandro Giovannini & Maurizio Iacopetta & Raoul Minetti, 2013. "Financial Markets, Banks, and Growth : Disentangling the links," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 105-147.
    12. Rosa Capolupo, 2018. "Finance, Investment and Growth: Evidence for Italy," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 47(1), pages 145-186, February.
    13. Beck, T.H.L., 2011. "The Role of Finance in Economic Development : Benefits, Risks, and Politics," Discussion Paper 2011-141, Tilburg University, Center for Economic Research.
    14. Kar, Muhsin & NazlIoglu, Saban & AgIr, Hüseyin, 2011. "Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis," Economic Modelling, Elsevier, vol. 28(1-2), pages 685-693, January.
    15. Muhammad Arshad Khan & Abdul Qayyum, 2007. "Trade Liberalisation, Financial Development and Economic Growth," PIDE-Working Papers 2007:19, Pakistan Institute of Development Economics.
    16. repec:ipg:wpaper:2014-485 is not listed on IDEAS
    17. Muhammad Shahbaz & Ijaz Ur Rehman & Ahmed Taneem Muzaffar, 2015. "Re-Visiting Financial Development and Economic Growth Nexus: The Role of Capitalization in Bangladesh," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 452-471, September.
    18. Ang, James B. & McKibbin, Warwick J., 2007. "Financial liberalization, financial sector development and growth: Evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 84(1), pages 215-233, September.
    19. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    20. Hondroyiannis, George & Lolos, Sarantis & Papapetrou, Evangelia, 2005. "Financial markets and economic growth in Greece, 1986-1999," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(2), pages 173-188, April.
    21. Rodolfo Cermeño & María Roa García & Claudio González-Vega, 2012. "Financial Development and Volatility of Growth: Time Series Evidence for Mexico and USA," DEGIT Conference Papers c017_035, DEGIT, Dynamics, Economic Growth, and International Trade.

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bas:econth:y:2009:i:7:p:38-66. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/ikbasbg.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Diana Dimitrova (email available below). General contact details of provider: https://edirc.repec.org/data/ikbasbg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.