Stock Markets, Banks, and Economic Growth

Ross Levine () and Sara Zervos

American Economic Review, 1998, vol. 88, issue 3, 537-58

Abstract: Do well-functioning stock markets and banks promote long-run economic growth? This paper shows that stock market liquidity and banking development both positively predict growth, capital accumulation, and productivity improvements when entered together in regressions, even after controlling for economic and political factors. The results are consistent with the views that financial markets provide important services for growth and that stock markets provide different services from banks. The paper also finds that stock market size, volatility, and international integration are not robustly linked with growth and that none of the financial indicators is closely associated with private saving rates. Copyright 1998 by American Economic Association.

Date: 1998
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Working Paper: Stock markets, banks, and economic growth (1996)
Working Paper: Stock markets, banks and economic growth
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