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Financial development and growth in European regions

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  • Paola Rossi
  • Diego Scalise

Abstract

We study the relationship between financial development and economic growth across 110 European regions from 1997 to 2018. We single out two dimensions of financial development in the data capturing the capillarity of bank branches and the agglomeration of the financial industry at large and study their relationship with regional economic growth. To establish a causal nexus, we employ two‐ways fixed effects, instrumental variables, and the Arellano–Bond estimator. Our estimates indicate that what matters the most for regional economic growth is the agglomeration of a complex financial sector rather than the mere presence of bank branches.

Suggested Citation

  • Paola Rossi & Diego Scalise, 2022. "Financial development and growth in European regions," Journal of Regional Science, Wiley Blackwell, vol. 62(2), pages 389-411, March.
    • Handle: RePEc:bla:jregsc:v:62:y:2022:i:2:p:389-411
    DOI: 10.1111/jors.12572
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    More about this item

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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