Regional growth and finance in Europe: is there a quality effect of bank efficiency?

Iftekhar Hasan, Michael Koetter and Michael Wedow

No 13/2009, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: In this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost- and profit-efficiency estimates as quality measures for financial institutions. Contrary to the usual quantitative proxies for financial development, the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds. An improvement in bank efficiency spurs five times more regional growth than does an identical increase in credit. More credit provided by efficient banks exerts an independent growth effect in addition to the direct quantity and quality channel effects.

Keywords: bank performance; regional growth; bank efficiency; Europe (search for similar items in EconPapers)
JEL-codes: G21 O16 O47 O52 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (14)

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Journal Article: Regional growth and finance in Europe: Is there a quality effect of bank efficiency? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2009_013

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