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Financial and Economic Development Nexus: evidence from Brazilian municipalities

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  • Marcos Soares da Silva

Abstract

This paper investigates the relationship between financial development and economic development for 5,564 Brazilian municipalities in 2012. Using supply-side information, we propose a way to measure financial development at the municipality level. This composite index is used to evaluate how financial service is distributed throughout the country. Our empirical strategy consists in examining the effect of spatial dependence among municipalities by applying a spatial-autoregressive with spatial-autoregressive disturbance model (SARAR). We find a positive and significant association of the economic development between the municipality and its neighbors, after controlling for relevant factors. The results also suggest that financial development has a large positive impact on local economic development.

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  • Marcos Soares da Silva, 2015. "Financial and Economic Development Nexus: evidence from Brazilian municipalities," Working Papers Series 399, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:399
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    File URL: https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/wps399.pdf
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    Cited by:

    1. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, vol. 100(4), pages 1875-1891, September.
    2. K. Siva Kiran Guptha & R. Prabhakar Rao, 2018. "The causal relationship between financial development and economic growth: an experience with BRICS economies," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 20(2), pages 308-326, October.
    3. Emerson Erik Schmitz & Thiago Christiano Silva, 2020. "Financial Intermediation, Human Capital Development and Economic Growth," Working Papers Series 533, Central Bank of Brazil, Research Department.

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