Financial Development and Productive Efficiency in OECD Countries: An Exploratory Analysis

24 Pages Posted: 16 Jun 2006

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; Universidad del País Vasco (UPV/EHU)

Georgios E. Chortareas

University of Athens - Faculty of Economics; University of Essex - Department of Accounting, Finance & Management; King's College London

Evangelia Desli

Aristotle University of Thessaloniki - School of Economics

Abstract

The recent literature provides evidence for a positive relationship between financial deepening and growth but is quite silent on the exact channels through which it materializes. Theory suggests that production efficiency should be one of those main channels. We attempt to capture this channel by modeling productive efficiency explicitly and constructing efficiency frontiers using data envelopment analysis. We apply this procedure to consider whether financial development creates productive efficiency gains in the industrialized OECD countries. Our results show that financial development contributes to productive efficiency. However, this effect weakens over time during the period under scrutiny. Moreover, we find that the effects of financial deepening on productive efficiency depend on the degree of efficiency already achieved.

Suggested Citation

Arestis, Philip and Chortareas, Georgios and Desli, Evangelia, Financial Development and Productive Efficiency in OECD Countries: An Exploratory Analysis. Manchester School, Vol. 74, No. 4, pp. 417-440, July 2006. Available at SSRN: https://ssrn.com/abstract=908702 or http://dx.doi.org/10.1111/j.1467-9957.2006.00502.x

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Universidad del País Vasco (UPV/EHU)

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

Georgios Chortareas

University of Athens - Faculty of Economics ( email )

8 Pesmazoglou street
GR-10559 Athens
Greece
+(30) 210 3689805 (Phone)
+(30) 210 3689810 (Fax)

University of Essex - Department of Accounting, Finance & Management ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

King's College London ( email )

Strand
London, England WC2R 2LS
United Kingdom

Evangelia Desli

Aristotle University of Thessaloniki - School of Economics ( email )

Thessaloniki, 54124
Greece

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
28
Abstract Views
495
PlumX Metrics