The Quality of Banking and Regional Growth
Deutsche Bundesbank Discussion Paper No. 2
34 Pages Posted: 30 Aug 2007
There are 2 versions of this paper
The Quality of Banking and Regional Growth
The Quality of Banking and Regional Growth
Date Written: August 28, 2007
Abstract
We test whether output growth in European economic agglomeration regions depends on financial development. To this end we suggest a relative measure of the quality of financial institutions rather than the usual quantity proxy of financial development. In order to measure the quality of financial development we use profit efficiency derived from stochastic frontier analysis. We show that more efficient banks spur regional growth while the typically used quantity measure of financial development is negligible. Also, our results suggest an additional channel through which better banking can spur growth: the interaction of more credit with efficient banks.
Keywords: Bank performance, regional growth, bank efficiency, Europe
JEL Classification: G21, O16, O47, O52
Suggested Citation: Suggested Citation
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