Hostname: page-component-586b7cd67f-t7czq Total loading time: 0 Render date: 2024-11-22T21:06:24.577Z Has data issue: false hasContentIssue false
  • English
  • Français

FINANCE AND BALANCED GROWTH

Published online by Cambridge University Press:  28 March 2013

Alex Trew
Alex Trew*
Affiliation:
University of St. Andrews
*
Address correspondence to: Alex Trew, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, UK, KY16 9AL; e-mail: [email protected]; URL: http://www.st-andrews.ac.uk/~awt2.
Get access Rights & Permissions [Opens in a new window]

Abstract

We study the relationships between various concepts of financial development and balanced economic growth. A model of endogenous growth that incorporates roles for both financial efficiency and access to financial services permits a better understanding of the relationship between the size of the financial sector (value added) and growth. Higher financial value added results from some, but not all, kinds of finance-driven growth. If greater access rather than greater efficiency generates higher growth, then value added and growth can be positively correlated. We present some preliminary empirical results that support the importance of access alongside efficiency in explaining cross-country variations in growth.

Keywords

Finance and GrowthEndogenous GrowthUzawa Theorem
Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 4 , June 2014 , pp. 883 - 898
Copyright
Copyright © Cambridge University Press 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Acemoglu, Daron (2009) Introduction to Modern Economic Growth. Princeton, NJ: Princeton University Press.Google Scholar
Acemoglu, Daron and Zilibotti, Fabrizio (1997) Was Prometheus unbound by chance? Risk, diversification and growth. Journal of Political Economy 105 (5), 709–751.CrossRefGoogle Scholar
Aghion, Philippe, Howitt, Peter, and Mayer-Foulkes, David (2005) The effect of financial development on convergence: Theory and evidence. Quarterly Journal of Economics 120 (1), 173–222.Google Scholar
Beck, Thorsten (2008) The econometrics of finance and growth. In Mills, Terence C. and Patterson, Kerry (eds.), Palgrave Handbook of Econometrics, vol. 2, pp. 1180–1211. New York: Palgrave Macmillan.Google Scholar
Beck, Thorsten and Demirgüç-Kunt, Asil (2008) Access to finance: An unfinished agenda. World Bank Economic Review 22 (3), 383–396.Google Scholar
Beck, Thorsten, Demirgüç-Kunt, Asil, and Levine, Ross (2000) A new database on the structure and development of the financial sector. World Bank Economic Review 14 (3), 597–605. May 2009 revision. The dataset is updated at the World Bank Finance Research Web site, http://econ.worldbank.org/.Google Scholar
Blackburn, Keith and Hung, Victor T.Y. (1998) A theory of growth, financial development and trade. Economica 65 (1), 107–124.Google Scholar
Capasso, Salvatore (2004) Financial markets, development and growth: Tales of information asymmetry. Journal of Economic Surveys 18 (3), 267–92.Google Scholar
De la Fuente, Angel and Marín, Jose M. (1996) Innovation, bank monitoring, and endogenous financial development. Journal of Monetary Economics 38 (1), 269–301.CrossRefGoogle Scholar
Demetriades, Panicos O. and Hussein, Khaled A. (1996) Does financial development cause economic growth? Time-series evidence from 16 countries. Journal of Development Economics 51 (2), 387–411.Google Scholar
Demetriades, Panicos O. and Rousseau, Peter L. (2011) The Changing Face of Financial Development. Mimeo, University of Leicester.Google Scholar
Demirgüç-Kunt, Asli and Maksimovic, Vojislav (1998) Law, finance and firm growth. Journal of Finance 53, 2207–2237.CrossRefGoogle Scholar
Greenwood, Jeremy and Jovanovic, Boyan (1990) Financial development, growth and the distribution of income. Journal of Political Economy 98 (5), 1076–1107.CrossRefGoogle Scholar
Greenwood, Jeremy, Sanchez, Juan M., and Wang, Cheng (2010) Financing development: The role of information costs. American Economic Review 100, 1875–1891.Google Scholar
Hasan, Iftekhar, Koetter, Michael, and Wedow, Michael (2009) Regional growth and finance in Europe: Is there a quality effect of bank efficiency? Journal of Banking and Finance 33, 1446–1453.Google Scholar
Heston, Alan, Summers, Robert, and Aten, Bettina (2011) Penn World Table Version 7.0. Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania.Google Scholar
Horii, Ryo, Ohdoi, Ryoji, and Yamamoto, Kazuhiro (in press) Financial infrastructure, technological shift, and inequality in economic development. Macroeconomic Dynamics.Google Scholar
Jones, Charles I. and Scrimgeour, Dean (2008) A new proof of Uzawa's steady-state growth theorem. Review of Economics and Statistics 90 (1), 180–182.Google Scholar
Kendall, Jake, Mylenko, Nataliya, and Ponce, Alejandro (2010) Measuring Financial Access around the World. Policy research working paper 5253, The World Bank.CrossRefGoogle Scholar
Khan, Aubhik (2001) Financial development and economic growth. Macroeconomic Dynamics 5 (3), 413–433.Google Scholar
King, Robert G. and Levine, Ross (1993a) Finance and growth: Schumpeter might be right. Quarterly Journal of Economics 108 (3), 717–737.Google Scholar
King, Robert G. and Levine, Ross (1993b) Finance, entrepreneurship, and growth: Theory and evidence. Journal of Monetary Economics 32 (3), 513–542.Google Scholar
Laeven, Luc, Levine, Ross, and Michalopoulos, Stelios (2009) Financial Innovation and Endogenous Growth. NBER working paper 15356.Google Scholar
Levine, Ross (2005) Finance and growth: Theory, mechanisms and evidence. In Aghion, P. and Durlauf, S.N. (eds.), Handbook of Economic Growth, pp. 865–934. Amsterdam: Elsevier.Google Scholar
Levine, Ross, Loayza, Norman, and Beck, Thorsten (2000) Financial intermediation and growth: Causality and causes. Journal of Monetary Economics 46 (1), 31–77.Google Scholar
Morales, Maria F. (2003) Financial intermediation in a model of growth through creative destruction. Macroeconomic Dynamics 7 (3), 363–393.Google Scholar
OECD (2010) Structural Analysis. 2010 ed. ESDS International, University of Manchester. DOI: 10.5257/oecd/stan/2010.Google Scholar
Rioja, Felix and Valev, Neven (2004) Does one size fit all? A reexamination of the finance and growth relationship. Journal of Development Economics 74 (2), 429–447.Google Scholar
Rousseau, Peter L. (1998) The permanent effects of innovation on financial depth: Theory and US historical evidence from unobservable components models. Journal of Monetary Economics 42 (2), 387–425.Google Scholar
Rousseau, Peter L. and Sylla, Richard (2005) Emerging financial markets and early US growth. Explorations in Economic History 42 (1), 1–26.CrossRefGoogle Scholar
Rousseau, Peter L. and Wachtel, Paul (2011) What is happening to the impact of financial deepening on economic growth. Economic Inquiry 49 (1), 276–288.CrossRefGoogle Scholar
Schlicht, Ekkehart (2006) A variant of Uzawa's theorem. Economics Bulletin 5 (6), 1–5.Google Scholar
Townsend, Robert M. (1983) Financial structure and economic activity. American Economic Review 73 (5), 895–911.Google Scholar
Uzawa, Hirofumi (1961) Neutral inventions and the stability of growth equilibrium. Review of Economic Studies 28 (2), 117–124.Google Scholar