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The finance and growth nexus revisited

Author

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  • Beck, Roland
  • Georgiadis, Georgios
  • Straub, Roland

Abstract

We find that an expansion of credit has a positive effect on per capita output growth only up to a point. Beyond this threshold the impact of finance on growth is not statistically significant anymore. We show, however, that the estimated non-linear relationship may stem from the omission of factors not considered in the literature so far. These factors may have a negative impact on growth in mature financial systems, and include the magnitude of financial cycles as well as the importance of non-intermediation activities in banks’ business models.

Suggested Citation

  • Beck, Roland & Georgiadis, Georgios & Straub, Roland, 2014. "The finance and growth nexus revisited," Economics Letters, Elsevier, vol. 124(3), pages 382-385.
    • Handle: RePEc:eee:ecolet:v:124:y:2014:i:3:p:382-385
    DOI: 10.1016/j.econlet.2014.06.024
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    More about this item

    Keywords

    Growth; Financial development; Dynamic panel data;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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