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Does Finance Matter for Growth? The New Growth Theory Facing the East Asian "Productivity Puzzle

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Listed:
  • Flora Bellone

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique)

  • Muriel Dal-Pont Legrand

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article surveys the last decade of theoretical literature on the finance-growth relationship developed within the Endogenous Growth Paradigm. This literature offers a conceptual framework whereby finance matters for growth mainly through its impact on Total Factor Productivity (TFP) growth, while savings and investment ambiguously respond to financial development. This main result strongly contrasts with the fact that the most successful growing economies of the last four decades have experimented high savings and investment rates but not high TFP performances, a result known under the "East-Asian Productivity Puzzle". Taking this paradox has a starting point, our paper makes two basic claims. First, progress towards a more comprehensive analysis of the role of financial factors requires an accurate assessment of the causal relationship between capital accumulation and technological change in development processes. Second, finance may matter for growth mainly through its causal role in specific episodes of growth regimes shifts.

Suggested Citation

  • Flora Bellone & Muriel Dal-Pont Legrand, 2003. "Does Finance Matter for Growth? The New Growth Theory Facing the East Asian "Productivity Puzzle," Post-Print halshs-00484087, HAL.
    • Handle: RePEc:hal:journl:halshs-00484087
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    Cited by:

    1. Muriel Dal-Pont Legrand & Tosi Elise & Dominique Torre, 2002. "La Banque Centrale Européenne entre apprentissage et crédibilité : trois scénarii," Post-Print halshs-00484088, HAL.
    2. Flora Bellone, 2008. "The role of domestic savings in outward-oriented growth strategies," Journal of Evolutionary Economics, Springer, vol. 18(2), pages 183-199, April.

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