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Financial Markets Banks and Growth: Disentangling the Links

Author

Listed:
  • Alessandro Giovannini

    (European Central Bank - European Central Bank)

  • Maurizio Iacopetta

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Raoul Minetti

    (Michigan State University [East Lansing] - Michigan State University System)

Abstract

The paper reviews the state of the economic literature on the link between financial development and growth. We first examine the issue of measurement of financial development and the debate on the direction of causality between finance and growth. Next, we extensively discuss the various channels through which the financial sector can affect growth, including the increase in the efficiency of capital allocation, the reduction in information costs, the improvement of risk management, and the support of innovation. The analysis is conducted referring both to the theoretical literature and to the most recent empirical findings. We conclude by drawing lessons for the current debate on the reform of the financial sector in the aftermath of the Great Recession.

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  • Alessandro Giovannini & Maurizio Iacopetta & Raoul Minetti, 2013. "Financial Markets Banks and Growth: Disentangling the Links," SciencePo Working papers Main hal-03460718, HAL.
    • Handle: RePEc:hal:spmain:hal-03460718
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    19. Koetter, Michael & Wedow, Michael, 2010. "Finance and growth in a bank-based economy: Is it quantity or quality that matters?," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1529-1545, December.
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    More about this item

    Keywords

    financial development; growth; banks; stock markets; crisis;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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