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Growth and Inequality Effects of Decades of Financial Transformation in OECD Countries

Author

Listed:
  • Boris Cournède

    (OECD Economics Department)

  • Catherine L. Mann

    (ECO/PED, OECD Economics Department)

Abstract

Finance has massively expanded and deeply changed across OECD countries over the past 50 years. Rapid growth of finance has been accompanied by a debt shift away from business towards household credit and, after 2000, a withering of equity capital. Econometric investigations indicate that these changes have contributed to slowing down potential growth. In OECD countries, higher credit/GDP ratios imply slower trend growth, especially when lending goes to households; by contrast, additional stockmarket funding boosts growth. Moreover, these trends have contributed to widening inequalities. There is a case for policymakers to focus on macro-prudential policy tools that optimise growth-stability trade-offs.

Suggested Citation

  • Boris Cournède & Catherine L. Mann, 2018. "Growth and Inequality Effects of Decades of Financial Transformation in OECD Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 3-14, March.
    • Handle: RePEc:pal:compes:v:60:y:2018:i:1:d:10.1057_s41294-017-0046-0
    DOI: 10.1057/s41294-017-0046-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Finance; Growth; Inequality; Credit; Equity;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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