In this paper we show that more efficient banks are particularly important in stimulating both output and productivity growth, while traditional volume measures of finance are much less important for productivity growth. ... Stephan Luck, The Effects of Banking Competition on Growth and Financial Stability: Evidence from the National Banking Era, SSRN Electronic Journal, 10.2139/ssrn.3202489, (2018). Does finance affect economic growth? A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per capita income. option. The law and finance literature has found that financial markets are better developed in countries with strong legal frameworks (La Porta et al. The basic specification in this paper is a semiparametric growth rate function where the interaction between external financial dependence of an industry and financial development of a country enters nonparametrically and the remaining variables are parametric. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. This paper examines whether nancial development facilitates economic growth by scrutinizing one rationale for such a relationship; that nancial development reduces the costs of external nance to rms. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. The Journal of Finance. Financial development stimulates growth, in particular in industries dependent on external finance. Shyn, Yong-Sang.November, 2005.Financial dependence, growth opportunities, and industrial growth in Korea,Report,[Seoul]Korea Institute of Finance,31 Financial Dependence and Growth By RAGHURAM G. RAJAN AND LUIGI ZINGALES * This paper examines whetherfinancial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of … As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. Nicola Cetorelli. All Rights Reserved. and Zingales, L. (1998) Financial Dependence and Growth. This still suggests an important role for finance in the allocation of resources, but shifts the emphasis from "financial dependence" to "global growth opportunities." THE JOURNAL OF FINANCE * VOL. View Article Google Scholar 21. JSTOR®, the JSTOR logo, JPASS®, Artstor®, Reveal Digital™ and ITHAKA® are registered trademarks of ITHAKA. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data. A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per capita income. 2001;56(2):617–48. A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per capita income. We find this to be true in a large sample of countries over the 1980's. Cetorelli, N. and Gamberra, M. (2001): “Banking market structure, financial dependence and growth: international evidence from industry data”, Journal of Finance 56, 617-648. © 1998 American Economic Association The relationships among competition in the financial sector, access of firms to external financing, and associated economic growth are ambiguous in theory. This still suggests an important role for finance in the allocation of resources, but shifts the emphasis from "financial dependence" to "global growth opportunities." Abstract. Does finance affect economic growth? Di Patti EB, Dell'Ariccia G. Bank competition and firm creation. Abstract. Some features of the site may not work correctly. small and medium size enterprises (SMEs) and, The journal publishes 11 issues containing articles on a broad range of topics. Evidence from a Sample of Middle Income Countries, Does too much finance harm economic growth, The nonlinear relationship between economic growth and financial development: Evidence from developing, emerging and advanced economies, The financial sector and economic growth in a panel of countries, Financial Development and Economic Growth: A Meta-Analysis, DOES FINANCIAL MARKET DEVELOPMENT MATTER IN EXPLAINING GROWTH FLUCTUATIONS, Financial Development, Growth, and the Distribution of Income, Finance and Growth: Schumpeter Might Be Right, Financial markets and growth: An overview☆, The Finance-Growth Nexus: Evidence from Bank Branch Deregulation, A Sensitivity Analysis of Cross-Country Growth Regressions, The Coevolution of the Real and Financial Sectors in the Growth Process, Good Policy or Good Luck? Michele Gambera. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. We analyze data from 19 developed and developing countries that have experienced financial crises during the last Financial Dependence, Banking Sector Competition, and Economic Growth. Once composed primarily of college and university professors in economics, the American Economic Association (AEA) now attracts 20,000+ members from academe, business, government, and consulting groups within diverse disciplines from multi-cultural backgrounds. Abstract. Semantic Scholar is a free, AI-powered research tool for scientific literature, based at the Allen Institute for AI. Introduction The global financial crisis has deeply affected the growth and finance nexus via several channels, including wide-scale private deleveraging, tighter credit constraints for some economic agents, e.g. 88, issue 3, 559-86 Abstract: This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of external finance to firms. Specifically, we ask whether industrial sectors that are relatively more in need of external finance develop disproportionately faster in countries with more-developed financial markets. Does finance affect economic growth? All are professionals or graduate-level students dedicated to economics research and teaching. The threshold of the ratio between private credit and GDP above which the contribution of a further expansion of credit to industry growth is negative depends on the degree of industries’ own and upstream financial dependence values and slightly varies across sectors, ranging from 89% to 87%, with higher thresholds observed for sectors with lower own financial dependence but higher upstream … Read your article online and download the PDF from your email or your account. Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data. 2003). The financial development and growth literature has established that finance matters for growth both at the macroeconomic and microeconomic levels (King and Levine 1993). Financial Dependence and Growth. The role of the financial sector in economic growth, The dynamics of finance-growth nexus in advanced economies, Is the Relationship between Financial Development and Economic Growth Monotonic? A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per capita income. of Chicago, the Finance Krishna Kumar, Canice Prendergast, and … Moreover, measuring competition in the financial sector can be complex. Home Policy Research Working Papers Financial Dependence, Banking Sector Competition, and Economic Growth. Established in 1911, the AER is among the nation's oldest and most respected scholarly journals in the economics profession and is celebrating over 100 years of publishing. Financial Dependence, Banking Sector Competition, and Economic Growth. Abstract: Does finance affect economic growth? In this note, we revisit an earlier, highly influential paper on Financial Dependence and Growth by Rajan and Zingales (1998), by re-examining their assumptions, and the robustness of their results to alternative theories and interpretations. A number of studies have identified a positive correlation between the level of development of a country’s financial sector and the rate of growth of its per capita income. The American Economic Review This item is part of JSTOR collection A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per capita income. This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship; that financial development reduces the costs of…. The American Economic Review, 88, 559-586. has been cited by the following article: TITLE: Can the Construction of Social Credit System Alleviate the Influence of Financing Constraints on the Growth of Enterprises? ©2000-2020 ITHAKA. Nicola Cetorelli. Chakraborty, Atreya and Charles X. Hu (2006): “Lending relationships in line-of-credit and nonline-of-credit loans: evidence from collateral use in small business”, Journal of Financial Intermediation, forthcoming. The American Economic Review is a general-interest economics journal. Select the purchase Cetorelli N, Gambera M. Banking market structure, financial dependence and growth: International evidence from industry data. CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship; that financial development reduces the costs of external finance to firms. By Raghuram G. Rajan and Luigi Zingales. This paper provides evidence that bank concentration promotes the growth of those industrial sectors that are more in need of external finance by facilitating credit access to younger firms. NBER WO~G PAPER SERIES FINANCIAL DEPENDENCE AND GROWTH Raghuram G. Rajan Luigi Zingales Working Paper 5758 NATIONAL BUREAU OF ECONOMIC Avenue MA 02138 1996 RESEARCH 1050 Massachusetts Cambridge, September We thank Gene Fama, Peter Klenow, David Scharfstein, Robert Vishny, University comments. Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data. Access supplemental materials and multimedia. See all articles by Stijn Claessens Stijn Claessens. Financial Dependence and Growth . Request Permissions. This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of … Cetorelli is at the Federal Reserve Bank of Chicago and Gambera is at Morningstar, Inc. For terms and use, please refer to our Terms and Conditions 1998; Beck et al. This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of external finance to firms. Search for more papers by this author. Financial Dependence, Stock Market Liberalizations, and Growth Nandini Gupta and Kathy Yuan∗ January 2002 Abstract Stock market liberalizations provide a natural experiment to test for the causal relation between financial development and economic In this note, we revisit an earlier, highly influential paper on Financial Dependence and Growth by Rajan and Zingales (1998), by re-examining their assumptions, and the robustness of their results to alternative theories and interpretations. FINANCIAL DEPENDENCE AND GROWTH ABSTRACT Does finance affect economic growth? Check out using a credit card or bank account with. Raghuram Rajan and Luigi Zingales () American Economic Review, 1998, vol. Financial Dependence and Growth: Diminishing Returns to Improvement in Financial Development Leilei Shen Kansas State University April 7, 2013 Abstract This paper examines how much nancial development facilitates economic growth by nonpara-metrically estimating the e ect of nancial development on reducing the costs of external nance to rms. We widen the understanding of the finance-growth nexus by accounting for the indirect effect of financial development through input-output (IO) linkages in determining the growth of industries across countries. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. Financial dependence and growth since the crisis (1) Volume 12 No 3 | 7 I.1. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. More>> Rajan, R.G. Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data Nicola Cetorelli1 Michele Gambera October 1999 1Federal Reserve Bank of Chicago, 230 S. LaSalle St., Chicago, IL 60604-1413.E-mail: ncetorelli@frbchi.org and Michele.Gambera@chi.frb.org, respectively. Financial Crises, Financial Dependence, and Industry Growth Luc Laeven, Daniela Klingebiel, and Randy Kroszner** Abstract This paper investigates the linkage between financial crises and industry growth. Does finance affect economic growth? We revisit an earlier, highly influential paper on financial dependence and growth by Rajan and Zingales (1998). No Access Policy Research Working Papers 21 Jun 2013. You are currently offline. Country Growth Performance and Temporary Shocks, Domestic Saving and International Capital Flows Reconsidered, View 2 excerpts, cites results and methods, By clicking accept or continuing to use the site, you agree to the terms outlined in our. 2 * APRIL 2001 Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data NICOLA CETORELLI and MICHELE GAMBERA* ABSTERACT This paper explores the empirical relevance of banking market structure on growth. We show this result is unlikely to be driven by omitted variables, outliers, or reverse causality. World Bank Policy Research Working Paper No. We re-examine their assumptions, and the robustness of their results to alternative theories and interpretations. Published By: American Economic Association, Access everything in the JPASS collection, Download up to 10 article PDFs to save and keep, Download up to 120 article PDFs to save and keep. Does Inequality Matter in the Finance-Growth Nexus? LVI, NO. The views ex-pressed in this paper are those of the authors and do not necessarily … 3481. 49 Pages Posted: 1 Feb 2005. In this paper we first estimate for 16 countries an industrial organization-based measure of banking system competition. Article citations. JSTOR is part of ITHAKA, a not-for-profit organization helping the academic community use digital technologies to preserve the scholarly record and to advance research and teaching in sustainable ways. I. CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): This paper examines whether nancial development facilitates economic growth by scrutinizing one rationale for such a relationship; that nancial development reduces the costs of external nance to rms. Bank for International Settlements (BIS) ... Financial Dependence and Growth. A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per capita income. 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