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Heterogeneity in the growth and finance relationship: How does the impact of bank finance vary by country and type of lending?

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Listed author(s):
  • Owen, Ann L.
  • Temesvary, Judit

Abstract

We explore heterogeneity in the finance-growth relationship by considering the effects of foreign and domestic lending separately. Estimating finite mixture models, we find that the effects of bank finance and foreign bank involvement on growth depend on 1) how well-developed the banking sector is, and 2) if foreign banks are involved via affiliates within the country or via cross-border loans. The experience of lenders with a local presence is important, but only once a threshold level of financial sector development is reached. In countries with underdeveloped banking sectors, the influence of foreign-owned lenders relative to locally-owned banks can hinder growth.

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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 31 (2014)
Issue (Month): C ()
Pages: 275-288

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Handle: RePEc:eee:reveco:v:31:y:2014:i:c:p:275-288
DOI: 10.1016/j.iref.2014.02.007
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

Keywords: Economic growth; International banking; Financial development; Finite mixture models;

Find related papers by JEL classification:

  • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
  • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
  • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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Cited by:

  1. dos Santos, Marco Aurélio & Fávero, Luiz Paulo Lopes & Distadio, Luiz Fernando, 2016. "Adoption of the International Financial Reporting Standards (IFRS) on companies’ financing structure in emerging economies," Finance Research Letters, Elsevier, vol. 16(C), pages 179-189.
  2. Ductor, Lorenzo & Grechyna, Daryna, 2015. "Financial development, real sector, and economic growth," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 393-405.
  3. 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.
  4. Konte M., 2014. "Do remittances not promote growth? : a bias-adjusted three-step mixture-of-regressions," MERIT Working Papers 075, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  5. Maricica Moscalu, 2015. "Integration between the Romanian and the Euro Area Financial Markets and its Impact on the Growth Rate of Romanian Listed Companies," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(4), pages 138-149, August.
  6. Mishra, Sagarika & Narayan, Paresh Kumar, 2015. "A nonparametric model of financial system and economic growth," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 175-191.

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