The Financial-Real Sector Nexus: Theory and Empirical Evidence

Research Institute for European Affairs Working Paper No. 43

72 Pages Posted: 1 Aug 2007

See all articles by David Niels Blum

David Niels Blum

affiliation not provided to SSRN

Klaus Federmair

affiliation not provided to SSRN

Gerhard Fink

Dept of International Business and Trade

Peter R. Haiss

WU Vienna University of Economics and Business; UniCredit Bank Austria; IES Vienna - Institute for the International Education of Students

Date Written: September 2002

Abstract

Without doubt a well-developed financial sector is related to efficient resource allocation and growth, but there is modest consensus on the direction of that link, on the notion of what is meant by "well developed", on which subset of the financial market is crucial and thus which organisational set-up provides optimal returns for both architects and market participants alike. With sluggish growth, torn down market barriers and systemic change in the EU accession countries the direction, magnitude, sustainability, institutional set-up of the finance-growth nexus (and which), becomes one of the core issues of both macroeconomic theory and practice. This paper reviews the economic theory available, provides a well structured overview of 54 empirical studies conducted since 1964, sets the stage for constructing a data base encompassing the major three segments of financial markets (stock, bond and bank credit) and provides the methodological background for combining cross-country production function and time-series approaches in order to answer the following questions: (1) What is the direction of the finance-growth nexus, (2) which segment of the financial sector drives whatever nexus there is, and (3) what are the features of a growth supportive financial architecture.

Keywords: economic growth, financial sector, financial system, banking intermediation, stock

JEL Classification: G1, G2, G3, O4

Suggested Citation

Blum, David Niels and Federmair, Klaus and Fink, Gerhard and Haiss, Peter R., The Financial-Real Sector Nexus: Theory and Empirical Evidence (September 2002). Research Institute for European Affairs Working Paper No. 43, Available at SSRN: https://ssrn.com/abstract=1004269 or http://dx.doi.org/10.2139/ssrn.1004269

David Niels Blum

affiliation not provided to SSRN ( email )

No Address Available

Klaus Federmair

affiliation not provided to SSRN ( email )

No Address Available

Gerhard Fink

Dept of International Business and Trade ( email )

Welthandelsplatz 1, Building D1
Wien, 1020
Austria
+43/1/313364331 (Phone)

Peter R. Haiss (Contact Author)

WU Vienna University of Economics and Business ( email )

Institute for Production Management
Welthandelsplatz 1
Vienna, A-1020
Austria
++43-660 4848254 (Phone)
++43-50505 8944214 (Fax)

UniCredit Bank Austria ( email )

Rothschildplatz 1
Vienna, A-1020
Austria
++43-(0)50505 44214 (Phone)
++43-(0)50505 89 44214 (Fax)

HOME PAGE: http://www.bankaustria.com

IES Vienna - Institute for the International Education of Students

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Austria

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