|
on Financial Development and Growth |
| By: | Klingebiel, Daniela; Kroszner, Randall S; Laeven, Luc |
| Abstract: | This paper investigates the growth impact of banking crises on industries with different levels of dependence on external sources of finance to analyze the mechanisms linking financial shocks and real activity. If the banking system is the key element allowing credit constraints to be relaxed, then a sudden loss of these intermediaries in a system where such intermediaries are important should have a disproportionately contractionary impact on the sectors that flourished due to their reliance on banks. Using data from 38 developed and developing countries that experienced financial crises during the last quarter century, we find that sectors highly dependent on external finance tend to experience a substantially greater contraction of value added during a banking crisis in deeper financial systems than in countries with shallower financial systems. On average, in a country experiencing a banking crisis, a sector at the 75th percentile of external dependence and located in a country at the 75th percentile of private credit to GDP would experience a 1.6 percent greater contraction in growth in value added between the crisis and pre-crisis period than a sector at the 25th percentile of external dependence and private credit to GDP. This effect is sizeable compared with an overall mean decline in growth of 3.5 percent between these two periods. Our results, however, do not suggest that on net the externally dependent firms fare worse in deep financial systems. |
| Keywords: | banking and financial crises; credit channel; financial development; financing constraints |
| JEL: | G21 O16 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5623&r=fdg |
| By: | Fan, Xuejun; Jacobs, Jan; Lensink, Robert (Groningen University) |
| Abstract: | This paper contributes to the empirical finance-growth literature by examining the relationship between financial depth, banking sector development, stock market development and economic growth in China. After an extensive survey on recent financial reforms in China, we apply Granger (non-)causality tests for non-stationary variables to examine long-run and short-run causality between economic growth and financial development. We find positive relationships between financial depth, banking sector development and growth. However, stock market development does not seem to have a positive effect on long-run economic growth. |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:rugccs:2005/09&r=fdg |
| By: | Hendrik Hakenes (Max Planck Institute for Research on Collective Goods, Kurt-Schumacher-Str. 10, 53113 Bonn, Germany, hakenes@coll.mpg.de); Isabel Schnabel (Max Planck Institute for Research on Collective Goods, Kurt-Schumacher-Str. 10, 53113 Bonn, Germany, schnabel@coll.mpg.de) |
| Abstract: | This paper yields a rationale for why subsidized public banks may be desirable from a regional perspective in a financially integrated economy. We present a model with credit rationing and heterogeneous regions in which public banks prevent a capital drain from poorer to richer regions by subsidizing local depositors, for example, through a public guarantee. Under some conditions, cooperative banks can perform the same function without any subsidization; however, they may be crowded out by public banks. We also discuss the impact of the political structure on the emergence of public banks in a political-economy setting and the role of interregional mobility. |
| Keywords: | Public banks, cooperative banks, capital drain, credit rationing, financial integration, privatization. |
| JEL: | G21 F36 H11 L33 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:107&r=fdg |