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Could financial distortions be no impediment to economic growth after all? Evidence from China

Author

Listed:
  • Alessandra Guariglia

    (UON - University of Nottingham, UK)

  • Sandra Poncet

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

Abstract

Using data for 30 Chinese provinces over the period 1989-2003, this study examines the relationship between finance, and real GDP, capital, and total factor productivity growth. We find that traditionally used indicators of financial development and China-specific indicators measuring the level of state interventionism in finance are generally negatively associated with growth and its sources, while indicators measuring the degree of market driven financing in the economy are positively associated with them. These effects have been gradually declining over time, and are weaker for high FDI recipients, suggesting that FDI may be used to alleviate the costs associated with the inefficient banking sector.

Suggested Citation

  • Alessandra Guariglia & Sandra Poncet, 2008. "Could financial distortions be no impediment to economic growth after all? Evidence from China," Post-Print hal-00649295, HAL.
    • Handle: RePEc:hal:journl:hal-00649295
    DOI: 10.1016/j.jce.2007.12.003
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