Banking and Growth: Evidence From a Regression Discontinuity Analysis

54 Pages Posted: 18 Jan 2018

See all articles by Nathaniel Young

Nathaniel Young

European Bank for Reconstruction and Development (EBRD)

Date Written: November 09, 2017

Abstract

This paper investigates the link between banking system expansion and economic growth. Contrary to evidence from the United States, several recent microeconomic studies from developing country settings do not find enduring effects of banking that carry over to the medium or long term. The paper looks at the exogenous expansion of bank branches in India, driven by a previously unstudied policy reform from 2005. Iterating a regression discontinuity design, it traces branch growth before and after the reform along with responses from the real economy. The paper finds that the expansion of financial intermediation led to positive outcomes in both agriculture and manufacturing, and growth in local GDP.

Keywords: banking, growth, regression discontinuity, India

JEL Classification: G21, G28, L13, O12, O16

Suggested Citation

Young, Nathaniel, Banking and Growth: Evidence From a Regression Discontinuity Analysis (November 09, 2017). EBRD Working Paper No. 207, Available at SSRN: https://ssrn.com/abstract=3104632 or http://dx.doi.org/10.2139/ssrn.3104632

Nathaniel Young (Contact Author)

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

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