The Transitional Dynamic of Finance Led Growth

Weshah Razzak and El Mostafa Bentour

No 2001, Discussion Papers from School of Economics and Finance, Massey University, New Zealand

Abstract: We depart from the empirical literature on testing the finance led growth. Instead of regression analysis, we use a semi-endogenous growth model, which identifies two productivity growth paths: a steady state and a transitional path. Steady state growth is anchored by populationgrowth. In the transitional dynamic, productivity growth depends on the typical factors growth rates, and excess knowledge, which is the deviation of TFP in the financial sector from steady state growth. TFP is endogenous. It is an increasing function of global research efforts, which is driven by the proportion of population in developed countries that is engaged in research in finance, and the stock of human capital. We find positive evidence for this theory of TFP in the data of ten developed European countries and the United States. We also found some evidence for finance-led-growth, albeit weaker after the past Global Financial Crisis.

Keywords: Semi endogenous growth; finance; productivity growth (search for similar items in EconPapers)
JEL-codes: E10 O40 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2020
New Economics Papers: this item is included in nep-agr, nep-gro and nep-mac
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Related works:
Working Paper: The Transitional Dynamic of Finance Led Growth (2020)
Working Paper: The transitional dynamic of finance led growth (2020)
Working Paper: The transitional dynamic of finance led growth (2020)
Working Paper: The Transitional Dynamic of Finance Led Growth (2020)
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