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State history and the finance-growth nexus: Evidence from transition economies

Ákos Dombi and Theocharis Grigoriadis ()

Economic Systems, 2020, vol. 44, issue 1

Abstract: In this paper, we analyze the growth effects of state history and financial development in transition economies. We show that accumulated experience with established statehood yields significant results and transforms the impact of finance on growth in East-Central Europe, Southeastern Europe and the former Soviet Union. State history as a proxy for long-run ancestral exposure to institutions, political organization and centralization negatively affects the finance-growth nexus. We argue that a long state history is likely to generate extractive institutions that facilitate the provision of soft budget constraints and thereby impair the finance-growth nexus.

Keywords: Financial development; Economic growth; State history; Transition economies (search for similar items in EconPapers)
JEL-codes: G21 O43 P26 P51 Z10 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.ecosys.2019.100738

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