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Are financial activities harmful for regional growth? Contradictory evidence from the Indonesian panel data

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  • Yuri Mansury
  • Wook Sohn

Abstract

Using high-frequency panel data for Indonesian provinces, we find that financial activities are associated with slower growth rates of productivity and output per capita. In particular, bank credit alone appears to inhibit growth more than the impact of credit and financial savings combined. This result contrasts starkly with the evidence from low-frequency panel, where the estimates suggest that bank credit promotes faster productivity and higher growth of per capita output. The contradictory evidence is attributable to the nonlinear growth dynamics of the finance-output nexus, where credit inhibits growth in the short run and promotes growth over the longer haul.

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  • Yuri Mansury & Wook Sohn, 2015. "Are financial activities harmful for regional growth? Contradictory evidence from the Indonesian panel data," Applied Economics, Taylor & Francis Journals, vol. 47(5), pages 519-530, January.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:5:p:519-530
    DOI: 10.1080/00036846.2014.975329
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    Cited by:

    1. Ichiro Iwasaki & Shigeki Ono, 2024. "Economic development and the finance–growth nexus: a meta-analytic approach," Applied Economics, Taylor & Francis Journals, vol. 56(57), pages 8021-8038, December.
    2. Wensheng Xiao & Yu Tang & Bright Obuobi & Shaojian Qu & Minglan Yuan & Decai Tang, 2023. "The Influence of Rule of Law on Government’s Sustainable Economic Management: Evidence from China," Sustainability, MDPI, vol. 15(15), pages 1-23, July.
    3. Anwar, Amar & Iwasaki, Ichiro, 2022. "The Finance–Growth Nexus inAsia : A Meta-Analytic Approach," CEI Working Paper Series 2022-03, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.

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