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Does financial intermediation matter for macroeconomic performance?

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  • Pierre-Guillaume Méon
  • Laurent Weill

Abstract

This paper investigates whether financial intermediary development influences macroeconomic technical efficiency on a sample of 47 countries, both developed and developing, over 1980-1995. We do so by applying Battese and Coelli (1995)’s method at the aggregate level. It is found that financial intermediary development, except financial depth, is on average associated with more efficiency. However we find strong evidence that this relationship is conditional on the level of economic development. The lower economic development the weaker is the impact of financial development on efficiency. That impact can even become negative in the poorest countries.
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  • Pierre-Guillaume Méon & Laurent Weill, "undated". "Does financial intermediation matter for macroeconomic performance?," ULB Institutional Repository 2013/8404, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/8404
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    3. Khan, Hameed & Khan, Umair, 2019. "Financial development and FDI inflows in China," Economics Discussion Papers 2019-54, Kiel Institute for the World Economy (IfW Kiel).
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    5. Chauvet, Lisa & Jacolin, Luc, 2017. "Financial Inclusion, Bank Concentration, and Firm Performance," World Development, Elsevier, vol. 97(C), pages 1-13.
    6. Gheeraert, Laurent & Weill, Laurent, 2015. "Does Islamic banking development favor macroeconomic efficiency? Evidence on the Islamic finance-growth nexus," Economic Modelling, Elsevier, vol. 47(C), pages 32-39.
    7. Ibrahim, Muazu & Alagidede, Paul, 2017. "Financial sector development, economic volatility and shocks in sub-Saharan Africa," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 484(C), pages 66-81.
    8. Lisa Chauvet & Luc Jacolin, 2015. "Financial Inclusion and Firms performance," Post-Print hal-01516871, HAL.
    9. Michiel Bijlsma & Andrei Dubovik, 2014. "Banks, Financial Markets and Growth in Developed Countries: a Survey of the empirical literature," CPB Discussion Paper 266.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Yves Kuhry & Laurent Weill, 2010. "Financial intermediation and macroeconomic efficiency," Applied Financial Economics, Taylor & Francis Journals, vol. 20(15), pages 1185-1193.
    11. Fareeha Adil & Rabia Nazir, 2023. "Firms Financial Inclusion and Export Performance: Evidence from Manufacturing Sector Firms in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 62(3), pages 409-430.
    12. Hunjra, Ahmed Imran & Islam, Faridul & Verhoeven, Peter & Hassan, M. Kabir, 2022. "The impact of a dual banking system on macroeconomic efficiency," Research in International Business and Finance, Elsevier, vol. 61(C).
    13. Banyár, József & Regős, Gábor, 2012. "Paradoxical price effects on insurance markets," Economic Modelling, Elsevier, vol. 29(4), pages 1399-1407.

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