Finance and Oil: Is There a Resource Curse in Financial Development?
European Banking Center Discussion Paper No. 2011-004
CentER Discussion Paper No. 2011-017
38 Pages Posted: 26 Feb 2011
Date Written: January 25, 2011
Abstract
This paper shows that the finance and growth relationship is as important in resource-based economies as in other economies. This paper also documents less developed financial systems in resource-based economies and banks that are more liquid, better capitalized and more profitable, but give fewer loans to firms. Firms in resource-based economies use less external finance and a smaller share of them uses bank loans, although there is the same level of demand as in other countries, thus pointing to supply constraints. Overall, there is some indication of a natural resource curse in financial development, which falls more on enterprises than on households. This calls for intensified efforts in resource-based economies to deepen and broaden financial systems.
Keywords: Financial Development, Natural Resource Curse
JEL Classification: G10, G20, Q39
Suggested Citation: Suggested Citation
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