IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The financial sector and economic growth in a panel of countries

  • Gründler, Klaus
  • Weitzel, Jan
Registered author(s):

    Does the financial sector contribute to economic growth? While most of the studies carried out before the Financial crisis tend to answer the question with 'yes', recent empirical work provides evidence that the opposite is true. We study these new findings in detail, applying GMM and 3SLS estimations of simultaneous equation models that cover a comprehensive set of growth determinants proposed by theory and recent empirical work. It turns out that finance in general exerts a positive influence but this influence vanishes in the development process and eventually becomes negative. While finance still boosts growth in developing countries, a growing financial sector hinders the increase of incomes in rich economies.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://econstor.eu/bitstream/10419/88920/1/775696552.pdf
    Download Restriction: no

    Paper provided by Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik in its series Wirtschaftswissenschaftliche Beiträge with number 123.

    as
    in new window

    Length:
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:zbw:wuewwb:123
    Contact details of provider: Postal: Sanderring 2, D-97070 Würzburg
    Phone: (0931) 31-2901
    Fax: (0931) 31-2101
    Web page: http://www.vwl.uni-wuerzburg.de/lehrstuehle/vwl4/startseite/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. repec:ner:tilbur:urn:nbn:nl:ui:12-3125520 is not listed on IDEAS
    2. Aghion, Philippe & Bacchetta, Philippe & Ranciere, Romain & Rogoff, Kenneth S., 2009. "Exchange Rate Volatility and Productivity Growth: The Role of Financial Development," Scholarly Articles 12490419, Harvard University Department of Economics.
    3. Robert J. Barro, 2003. "Determinants of Economic Growth in a Panel of Countries," CEMA Working Papers 505, China Economics and Management Academy, Central University of Finance and Economics.
    4. Klingebiel, Daniela & Kroszner, Randall S & Laeven, Luc, 2006. "Banking Crises, Financial Dependence and Growth," CEPR Discussion Papers 5623, C.E.P.R. Discussion Papers.
    5. Maria Fuensanta Morales, 2001. "Financial Intermediation in a Model of Growth through Creative Destruction," UFAE and IAE Working Papers 487.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    6. 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.
    7. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-50, July.
    8. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
    9. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
    10. Laeven, Luc & Levine, Ross & Michalopoulos, Stelios, 2015. "Financial innovation and endogenous growth," Journal of Financial Intermediation, Elsevier, vol. 24(1), pages 1-24.
    11. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
    12. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
    13. Patrick Bolton & Tano Santos & Jose A. Scheinkman, 2011. "Cream Skimming in Financial Markets," NBER Working Papers 16804, National Bureau of Economic Research, Inc.
    14. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
    15. Rafael La Porta & Florencio Lopezde-Silanes & Andrei Shleifer, 2000. "Government Ownership of Banks," NBER Working Papers 7620, National Bureau of Economic Research, Inc.
    16. Beck, Thorsten & Büyükkarabacak, Berrak & Rioja, Felix & Valev, Neven, 2009. "Who Gets the Credit? And Does It Matter? Household vs. Firm Lending across Countries," CEPR Discussion Papers 7400, C.E.P.R. Discussion Papers.
    17. Demirguc-Kunt, Asli & Huizinga, Harry, 2009. "Bank activity and funding strategies : the impact on risk and returns," Policy Research Working Paper Series 4837, The World Bank.
    18. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    19. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    20. 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.
    21. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2001. "Does Financial Liberalization Spur Growth?," NBER Working Papers 8245, National Bureau of Economic Research, Inc.
    22. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    23. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    24. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    25. Philippe Aghion & Peter Howitt, 2009. "The Economics of Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012634, June.
    26. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
    27. Levine, Ross, 1998. "The Legal Environment, Banks, and Long-Run Economic Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 596-613, August.
    28. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2002. "Does Local Financial Development Matter?," CEPR Discussion Papers 3307, C.E.P.R. Discussion Papers.
    29. Robert J. Barro, 2013. "Education and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 301-328, November.
    30. Benhabib, Jess & Spiegel, Mark M, 2000. " The Role of Financial Development in Growth and Investment," Journal of Economic Growth, Springer, vol. 5(4), pages 341-60, December.
    31. Peter L. Rousseau & Paul Wachtel, 2009. "What is Happening to the Impact of Financial Deepening on Economic Growth?," Vanderbilt University Department of Economics Working Papers 0915, Vanderbilt University Department of Economics.
    32. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    33. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
    34. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
    35. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
    36. Roubini, Nouriel & Sala-i-Martin, Xavier, 1992. "Financial repression and economic growth," Journal of Development Economics, Elsevier, vol. 39(1), pages 5-30, July.
    37. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    38. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934 Elsevier.
    39. Levine, Ross, 1999. "Law, Finance, and Economic Growth," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 8-35, January.
    40. Pierre-Olivier Gourinchas & Rodrigo Valdes & Oscar Landerretche, 2001. "Lending Booms: Latin America and the World," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
    41. repec:ner:tilbur:urn:nbn:nl:ui:12-3125519 is not listed on IDEAS
    42. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Market Development and Financial Intermediaries: Stylized Facts," World Bank Economic Review, World Bank Group, vol. 10(2), pages 291-321, May.
    43. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    44. Howitt, Peter & Mayer-Foulkes, David, 2005. "R&D, Implementation, and Stagnation: A Schumpeterian Theory of Convergence Clubs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 147-77, February.
    45. McCaig, Brian & Stengos, Thanasis, 2005. "Financial intermediation and growth: Some robustness results," Economics Letters, Elsevier, vol. 88(3), pages 306-312, September.
    46. Thomas Philippon, 2010. "Financiers versus Engineers: Should the Financial Sector Be Taxed or Subsidized?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 158-82, July.
    47. Asli Demirgüç-Kunt & Enrica Detragiache, 1998. "The Determinants of Banking Crises in Developing and Developed Countries," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 81-109, March.
    48. Enrico Berkes & Ugo Panizza & Jean-Louis Arcand, 2012. "Too Much Finance?," IMF Working Papers 12/161, International Monetary Fund.
    49. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:zbw:wuewwb:123. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.