'Finance And Growth' Re-Loaded

38 Pages Posted: 19 Nov 2018

See all articles by Steven Ongena

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Lizethe Mendez

Universidad Autónoma Metropolitana

Date Written: October 28, 2018


We assess the relationship between finance and growth over the period 1980-2014. We estimate a cross-country growth regression for 48 countries during 20 periods of 15 years starting in 1980 (to 1995) and ending in 1999 (to 2014). We use OLS and IV estimations and we find that: 1) overall financial development had a positive effect on economic growth during all periods of our sample, i.e., we confirm that from 1980 to 2014 financial services provided by the various financial systems were significant (to various degrees) for firm creation, industrial expansion and economic growth; but that, 2) the structure of financial markets was particularly relevant for economic growth until the financial crisis; while 3) the structure of the banking sector played a major role since; and finally that, 4) the legal system is the primary determinant of the effectiveness of the overall financial system in facilitating innovation and growth in (almost) all of our sample period. Hence, overall our results suggest that the relationship between finance and growth matters but also that it varies over time in strength and in sector origination.

Keywords: Financial Structure, Economic Growth, Financial Development

JEL Classification: O16, G16, G20

Suggested Citation

Ongena, Steven R. G. and Mendez, Lizethe, 'Finance And Growth' Re-Loaded (October 28, 2018). CFS Working Paper, No. 604, 2018, Available at SSRN: https://ssrn.com/abstract=3274345 or http://dx.doi.org/10.2139/ssrn.3274345

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000

NTNU Business School ( email )


Centre for Economic Policy Research (CEPR)

United Kingdom

Lizethe Mendez

Universidad Autónoma Metropolitana ( email )

Av San Rafael Atlixco No. 186
Col. Vicentina
Del. Iztapalapa, 09340

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