This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of … Di Patti EB, Dell'Ariccia G. Bank competition and firm creation. Nicola Cetorelli. Does Inequality Matter in the Finance-Growth Nexus? We revisit an earlier, highly influential paper on financial dependence and growth by Rajan and Zingales (1998). Article citations. 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. 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. Financial development stimulates growth, in particular in industries dependent on external finance. Some features of the site may not work correctly. ©2000-2020 ITHAKA. Does finance affect economic growth? As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. 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. 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? Semantic Scholar is a free, AI-powered research tool for scientific literature, based at the Allen Institute for AI. The Journal of Finance. 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. 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? Select the purchase THE JOURNAL OF FINANCE * VOL. By Raghuram G. Rajan and Luigi Zingales. Does finance affect 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. 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. Cetorelli is at the Federal Reserve Bank of Chicago and Gambera is at Morningstar, Inc. Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data. 49 Pages Posted: 1 Feb 2005. 3481. Cetorelli N, Gambera M. Banking market structure, financial dependence and growth: International evidence from industry data. The law and finance literature has found that financial markets are better developed in countries with strong legal frameworks (La Porta et al. Financial dependence and growth since the crisis (1) Volume 12 No 3 | 7 I.1. 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. © 1998 American Economic Association JSTOR®, the JSTOR logo, JPASS®, Artstor®, Reveal Digital™ and ITHAKA® are registered trademarks of ITHAKA. You are currently offline. 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 ... 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). Abstract. Financial Dependence, Banking Sector Competition, and 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. The American Economic Review is a general-interest economics journal. 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 … 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. All Rights Reserved. In this paper we first estimate for 16 countries an industrial organization-based measure of banking system competition. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. Abstract: Does finance affect economic growth? View Article Google Scholar 21. The journal publishes 11 issues containing articles on a broad range of topics. LVI, NO. 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. small and medium size enterprises (SMEs) and, 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 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. 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. Raghuram Rajan and Luigi Zingales () American Economic Review, 1998, vol. and Zingales, L. (1998) Financial Dependence and Growth. Shyn, Yong-Sang.November, 2005.Financial dependence, growth opportunities, and industrial growth in Korea,Report,[Seoul]Korea Institute of Finance,31 For terms and use, please refer to our Terms and Conditions Access supplemental materials and multimedia. Search for more papers by this author. Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data. The views ex-pressed in this paper are those of the authors and do not necessarily … Does finance affect economic growth? We re-examine 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. We analyze data from 19 developed and developing countries that have experienced financial crises during the last 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. 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? 2003). Home Policy Research Working Papers Financial Dependence, Banking Sector Competition, and Economic Growth. The financial development and growth literature has established that finance matters for growth both at the macroeconomic and microeconomic levels (King and Levine 1993). World Bank Policy Research Working Paper No. 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. 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 show this result is unlikely to be driven by omitted variables, outliers, or reverse causality. Read your article online and download the PDF from your email or your account. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. 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? 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? No Access Policy Research Working Papers 21 Jun 2013. 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. 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. Cetorelli, N. and Gamberra, M. (2001): “Banking market structure, financial dependence and growth: international evidence from industry data”, Journal of Finance 56, 617-648. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. 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. All are professionals or graduate-level students dedicated to economics research and teaching. 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. 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. 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. Abstract. Banking Market Structure, Financial Dependence and Growth: International Evidence from Industry Data. Nicola Cetorelli. Bank for International Settlements (BIS) ... Financial Dependence and Growth. 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." This still suggests an important role for finance in the allocation of resources, but shifts the emphasis from "financial dependence" to "global growth opportunities." 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. 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. 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. 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. of Chicago, the Finance Krishna Kumar, Canice Prendergast, and … Request Permissions. See all articles by Stijn Claessens Stijn Claessens. Financial Dependence, Banking Sector Competition, and Economic Growth. 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. The relationships among competition in the financial sector, access of firms to external financing, and associated economic growth are ambiguous in theory. Moreover, measuring competition in the financial sector can be complex. 2001;56(2):617–48. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. 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. I. 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: [email protected] and [email protected], respectively. More>> Rajan, R.G. 1998; Beck et al. Financial Dependence and Growth . Abstract. We find this to be true in a large sample of countries over the 1980's. 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