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Reassessing the impact of finance on growth

Author

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  • Stephen Cecchetti
  • Enisse Kharroubi

Abstract

This paper investigates how financial development affects aggregate productivity growth. Based on a sample of developed and emerging economies, we first show that the level of financial development is good only up to a point, after which it becomes a drag on growth. Second, focusing on advanced economies, we show that a fast-growing financial sector is detrimental to aggregate productivity growth.

Suggested Citation

  • Stephen Cecchetti & Enisse Kharroubi, 2012. "Reassessing the impact of finance on growth," BIS Working Papers 381, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:381
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    References listed on IDEAS

    as
    1. Pierre Cahuc & Edouard Challe, 2012. "Produce Or Speculate? Asset Bubbles, Occupational Choice, And Efficiency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1105-1131, November.
    2. Aghion, Philippe & Angeletos, George-Marios & Banerjee, Abhijit & Manova, Kalina, 2010. "Volatility and growth: Credit constraints and the composition of investment," Journal of Monetary Economics, Elsevier, vol. 57(3), pages 246-265, April.
    3. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.
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    More about this item

    Keywords

    Growth; financial development; credit booms; R&D intensity; financial dependence;

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