Financial Development and TFP Growth: Cross Country and Industry Level Evidence

36 Pages Posted: 29 Apr 2009

See all articles by Francisco Arizala

Francisco Arizala

International Monetary Fund (IMF)

Eduardo A. Cavallo

Inter-American Development Bank (IDB) - Research Department

Arturo José Galindo

Inter-American Development Bank

Multiple version iconThere are 2 versions of this paper

Date Written: April 20, 2009

Abstract

We estimate the impact of financial development on industry-level TFP growth using a largely unexploited panel of 77 countries with data for 26 manufacturing industries for the years 1963 to 2003. We find a significant relationship between financial development and industry-level TFP growth when controlling for country-time, and industry-time fixed effects. Our results are both statistically and economically significant. TFP growth can accelerate up to 0.6% per year, depending on the external finance requirement of industries, following a one standard deviation increase in financial development. Our results are robust to different samples and specifications.

Keywords: Financial Development, TFP growth, Volatility

JEL Classification: D24, E44, O47

Suggested Citation

Arizala, Francisco and Cavallo, Eduardo A. and Galindo, Arturo José, Financial Development and TFP Growth: Cross Country and Industry Level Evidence (April 20, 2009). Available at SSRN: https://ssrn.com/abstract=1395716 or http://dx.doi.org/10.2139/ssrn.1395716

Francisco Arizala

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Eduardo A. Cavallo

Inter-American Development Bank (IDB) - Research Department ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

Arturo José Galindo (Contact Author)

Inter-American Development Bank ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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