Stock Markets, Banks, and Economic Growth

Posted: 25 Jul 2000

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Sara Zervos

World Bank

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Do well-functionning stock markets and banks promote long-run economic growth? This paper shows that stock market liquidity and banking development both positively, predict growth, capital accumulation, and productivity improvements when entered together in regressions, even after controlling for economic and political factors. The results are consistent with the views that financial markets provide important services for growth, and that stock markets provide different services from banks. The paper also finds that stock market size, volatility, and integration with world markets are not robustly linked with growth, and that none of the financial indicators is closely associated with private saving rates.

JEL Classification: G00, O16, F36

Suggested Citation

Levine, Ross Eric and Zervos, Sara, Stock Markets, Banks, and Economic Growth. American Economic Review, Vol. 88, pp. 537-558, 1998. Available at SSRN:

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sara Zervos

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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