Reassessing the Impact of Finance on Growth

Cecchetti, Stephen G.; Kharroubi, Enisse

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Reassessing the Impact of Finance on Growth

BIS Working Paper No. 381

22 Pages Posted: 27 Jul 2012

See all articles by Stephen G. Cecchetti

Stephen G. Cecchetti

National Bureau of Economic Research (NBER); Brandeis International Business School; Centre for Economic Policy Research (CEPR)

Enisse Kharroubi

Bank for International Settlements (BIS)

Date Written: July 1, 2012

Abstract

This paper investigates how financial development affects aggregate productivity growth. Based on a sample of developed and emerging economies, we first show that the level of financial development is good only up to a point, after which it becomes a drag on growth. Second, focusing on advanced economies, we show that a fast-growing financial sector is detrimental to aggregate productivity growth.

Keywords: Growth, financial development, credit booms, R&D intensity, financial dependence

JEL Classification: D92, E22, E44, O4

Suggested Citation: Suggested Citation

Cecchetti, Stephen G. and Cecchetti, Stephen G. and Kharroubi, Enisse, Reassessing the Impact of Finance on Growth (July 1, 2012). BIS Working Paper No. 381, Available at SSRN: https://ssrn.com/abstract=2117753