The quality of banking and regional growth

Iftekhar Hasan, Michael Koetter and Michael Wedow

No 2007,10, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

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 (search for similar items in EconPapers)
JEL-codes: G21 O16 O47 O52 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-ban, nep-eec, nep-eff, nep-fdg and nep-geo
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp2:6153

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