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on Financial Development and Growth |
| By: | Alessandra Guariglia; Sandra Poncet |
| Abstract: | Using data for 30 Chinese provinces over the period 1989-2003, this study examines the relationship between the level of financial intermediary development, and real GDP growth, physical capital accumulation, and total factor productivity (TFP) growth. We find that traditionally used indicators of financial development and China-specific indicators measuring the level of state interventionism in finance are generally negatively associated with growth and its sources, while indicators measuring the degree of market driven financing in the economy are positively associated with GDP and TFP growth, and capital accumulation. These effects have gradually declined over time and are weaker for high FDI recipients. |
| Keywords: | Financial intermediation; economic growth; capital accumulation; productivity growth; China |
| JEL: | E44 G21 N15 O16 O40 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2006-21&r=fdg |
| By: | Ciccone, Antonio; Papaioannou, Elias |
| Abstract: | Does financial development result in capital being reallocated more rapidly to industries where it is most productive? We argue that if this was the case, financially developed countries should see faster growth in industries with investment opportunities due to global demand and productivity shifts. Testing this cross-industry cross-country growth implication requires proxies for (latent) global industry investment opportunities. We show that tests relying only on data from specific (benchmark) countries may yield spurious evidence for or against the hypothesis. We therefore develop an alternative approach that combines benchmark-country proxies with a proxy that does not reflect opportunities specific to a country or level of financial development. Our empirical results yield clear support for the capital reallocation hypothesis. |
| Keywords: | financial development; growth; investment opportunities; measurement error; sector analysis |
| JEL: | E23 E44 F30 G10 O40 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5969&r=fdg |