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Finance and Growth: A Critical Survey

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  • Alex Trew

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Abstract

We present a survey of the finance-growth nexus that raises a number of qualifications to the mainstream interpretation. Doubts regarding empirical consensus are investigated and we consider the prevalence of cross-section econometrics as dominant in shaping the present theoretical consensus. To facilitate a quantitative understanding of the theoretical literature we develop a model capable of capturing a number of key conclusions from theoretical research. The core implications of many finance and growth theories are shown to be disconnected not only from their modern empirical counterparts, but also from the historical literature.

Suggested Citation

  • Alex Trew, 2005. "Finance and Growth: A Critical Survey," CDMA Working Paper Series 200507, Centre for Dynamic Macroeconomic Analysis, revised 15 Apr 2006.
  • Handle: RePEc:san:cdmawp:0507
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    File URL: http://www.st-andrews.ac.uk/~wwwecon/CDMA/papers/wp0507.pdf
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    Cited by:

    1. Trew, Alex, 2008. "Efficiency, depth and growth: Quantitative implications of finance and growth theory," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1550-1568, December.
    2. Kar, Muhsin & NazlIoglu, Saban & AgIr, Hüseyin, 2011. "Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis," Economic Modelling, Elsevier, vol. 28(1-2), pages 685-693, January.
    3. Agustín Filippo, 2010. "Imperfectly Substitutable Financial Instruments in an Economic Development Model," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(57-58), pages 59-93, January -.
    4. Can ERBIL & Durmus OZDEMIR, "undated". "Does Financial Liberalization Trigger Long-Run Economic Growth?," EcoMod2008 23800033, EcoMod.
    5. Alberto BUCCI & Simone MARSIGLIO, 2016. "Financial Development and Economic Growth: Long Run Equilibrium and Transitional Dynamics," Departmental Working Papers 2016-16, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    6. Pradhan, Rudra P. & Arvin, Mak B. & Hall, John H. & Bahmani, Sahar, 2014. "Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries," Review of Financial Economics, Elsevier, vol. 23(4), pages 155-173.
    7. Kiril Danailov Kossev, 2008. "The Banking Sector and the Great Depression in Bulgaria, 1924 - 1938: Interlocking and Financial Sector Profitability," Working Papers 76, Bank of Greece.
    8. Md Nain & Bandi Kamaiah, 2014. "Financial development and economic growth in India: some evidence from non-linear causality analysis," Economic Change and Restructuring, Springer, vol. 47(4), pages 299-319, November.
    9. José Luis Hernández Mota, 2015. "El papel del desarrollo financiero como fuente del crecimiento económico," REVISTA FINANZAS Y POLÍTICA ECONÓMICA, UNIVERSIDAD CATOLICA DE COLOMBIA, vol. 7(2), pages 235-256, July.
    10. Marianna Succurro, 2012. "Bankruptcy systems and economic performance across countries: some empirical evidence," European Journal of Law and Economics, Springer, vol. 33(1), pages 101-126, February.
    11. Alex Trew, 2007. "Endogenous Financial Development and Industrial Takeoff," CDMA Working Paper Series 200702, Centre for Dynamic Macroeconomic Analysis.
    12. Max Gillman & Michal Kejak, 2007. " Inflation, Financial Development and Human Capital-Based Endogenous Growth: an Explanation of Ten Empirical Findings," CDMA Conference Paper Series 0703, Centre for Dynamic Macroeconomic Analysis.
    13. Garofalo, Giuseppe & Morganti, Patrizio, 2010. "Il finanziamento degli investimenti in R&S. Gli effetti sulla crescita e sulla struttura finanziaria," MPRA Paper 23551, University Library of Munich, Germany.
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    15. Paolo Coccorese & Damiano Silipo, 2015. "Growth without finance, finance without growth," Empirical Economics, Springer, vol. 49(1), pages 279-304, August.
    16. Chen, Zhiyuan & Li, Yong & Zhang, Jie, 2016. "The bank–firm relationship: Helping or grabbing?," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 385-403.
    17. V. U. Duc Cong & Kihwan Lee & V. U. Hoang Long, 2016. "An Empirical Analysis of the Prominent Roles of Taxations in the Synchronicity on Boost of Maritime Industry in Singapore," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 118-131.
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    19. David Hauner, 2006. "Fiscal Policy and Financial Development," IMF Working Papers 06/26, International Monetary Fund.
    20. Marianna Succurro, 2008. "Bankruptcy Systems And Economic Performance Across Contries: Some Empirical Evidence," Working Papers 200801, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    21. Anton Gerunov, 2014. "Connection between Financial Sector and Economic Growth at High Levels of Financial Development," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 39-68.
    22. Abbas Valadkhani & George Chen, 2014. "An empirical analysis of the US stock market and output growth volatility spillover effects on three Anglo-Saxon countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(3), pages 323-335, May.
    23. Rudra P. Pradhan & Mak B. Arvin & Neville R. Norman & John H. Hall, 2014. "The dynamics of banking sector and stock market maturity and the performance of Asian economies: Time series evidence," Journal of Economic and Administrative Sciences, Emerald Group Publishing, vol. 30(1), pages 16-44, May.
    24. Fiaschi, Alessandro, 2008. "A note about credit rationing on research and development," MPRA Paper 12300, University Library of Munich, Germany, revised 10 Dec 2008.
    25. Fanta Ashenafi Beyene & Makina Daniel, 2016. "The Finance Growth Link: Comparative Analysis of Two Eastern African Countries," Comparative Economic Research, De Gruyter Open, vol. 19(3), pages 147-167, September.

    More about this item

    Keywords

    finance and growth; endogenous growth; economic history.;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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