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New empirical evidence on local financial development and growth

Listed author(s):
  • Andrea Vaona

    ()

    (Facoltà di Economia, Università di Lugano, Svizzera; Kiel Institute for the World Economy, Kiel, Germany; University of Verona, Department of Economic Sciences, Verona, Italy)

  • Roberto Patuelli

    ()

    (Facoltà di Economia, Università di Lugano, Svizzera)

In this paper, we show that the regional finance-growth nexus in Italy is robust to a series of innovations with respect to the existing literature on the topic. We use finer measures of economic and financial development, as well as instruments with a deeper economic content. We rely on state-of-the-art cross-sectional and panel estimation methods, and we offer a thorough investigation of the nonlinearities in the relation between finance and growth. Our results show that, while local financial development is a key factor for economic growth, in regions with inefficient courts more credit might translate into reduced growth due to opportunistic behaviour and the consequent misallocation of funds.

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File URL: http://doc.rero.ch/lm.php?url=1000,42,6,20080514101234-JX/wp0805.pdf
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Paper provided by USI Università della Svizzera italiana in its series Quaderni della facoltà di Scienze economiche dell'Università di Lugano with number 0805.

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Length: 11 pages
Date of creation: 13 May 2008
Handle: RePEc:lug:wpaper:0805
Contact details of provider: Web page: https://www.bul.sbu.usi.ch

References listed on IDEAS
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  1. Magda Bianco & Tullio Jappelli & Marco Pagano, 2001. "Courts and Banks: Effects of Judicial Enforcement on Credit Markets," CSEF Working Papers 58, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Apr 2002.
  2. Loayza, Norman V. & Ranciere, Romain, 2006. "Financial Development, Financial Fragility, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 1051-1076, June.
  3. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "The Cost of Banking Regulation," NBER Working Papers 12501, National Bureau of Economic Research, Inc.
  4. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," CRSP working papers 511, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  5. Philip Arestis & Ambika Luintel & Kul Luintel, 2004. "Does Financial Structure Matter?," Money Macro and Finance (MMF) Research Group Conference 2004 61, Money Macro and Finance Research Group.
  6. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2002. "Does Local Financial Development Matter?," NBER Working Papers 8923, National Bureau of Economic Research, Inc.
  7. Fabiani, S. & Pellegrini, G., 1997. "Education, Infrastructure, Geography and Growth: An Empirical Analysis of the Development of Italian Provinces," Papers 323, Banca Italia - Servizio di Studi.
  8. Andrea Vaona, 2008. "Regional evidence on financial development, finance term structure and growth," Empirical Economics, Springer, vol. 34(1), pages 185-201, February.
  9. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
  10. Levine, Ross & Loayza, Norman & Beck, Thorsten, 2000. "Financial intermediation and growth: Causality and causes," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 31-77, August.
  11. Guariglia, Alessandra & Poncet, Sandra, 2008. "Could financial distortions be no impediment to economic growth after all? Evidence from China," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 633-657, December.
  12. Nicholas Apergis & Ioannis Filippidis & Claire Economidou, 2007. "Financial Deepening and Economic Growth Linkages: A Panel Data Analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(1), pages 179-198, April.
  13. David Roodman, 2003. "XTABOND2: Stata module to extend xtabond dynamic panel data estimator," Statistical Software Components S435901, Boston College Department of Economics, revised 01 Oct 2015.
  14. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
  15. Stefano Usai & Marco Vannini, 2005. "Banking structure and regional economic growth: lessons from Italy," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 39(4), pages 691-714, December.
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