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Finance and the sources of growth

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

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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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 58 (2000)
Issue (Month): 1-2 ()
Pages: 261-300

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Handle: RePEc:eee:jfinec:v:58:y:2000:i:1-2:p:261-300
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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