Finance and Growth: A Macroeconomic Assessment of the Evidence from a European Angle
43 Pages Posted: 29 Jul 2007
Date Written: July 2007
Abstract
This paper reviews the literature on the finance-growth nexus within a neoclassical growth framework, placing an emphasis on the policy implications in the current European environment, that has placed financial reforms high on the policy Agenda. While more research is needed to establish causality and verify the theoretical channels linking access to finance and growth, firm-level, industry-level, macro, and country-specific studies all tend to show a significant correlation between financial efficiency and economic performance. The empirical evidence hint that in underdeveloped and emerging countries financial development fosters aggregate growth mainly by lowering the cost of capital, while in advanced economies by raising total-factor-productivity.
Keywords: Finance, Financial Institutions, Development, Growth Decomposition, Financial Intermediation, Europe, Productivity
JEL Classification: G00, O00
Suggested Citation: Suggested Citation
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