Financial development and TFP growth: cross-country and industry-level evidence

Francisco Arizala, Eduardo Cavallo and Arturo Galindo

Applied Financial Economics, 2013, vol. 23, issue 6, 433-448

Abstract: This article estimates the impact of financial development on industry-level Total Factor Productivity (TFP) growth using a largely unexploited panel of 77 countries with data for 26 manufacturing industries for the years 1965 to 2003. A significant relationship is found between financial development and industry-level TFP growth when controlling for country-time and industry-time fixed effects. The results are both statistically and economically significant. TFP growth can accelerate up to 0.6% per year, depending on the external finance requirement of industries, following a one SD increase in financial development. The results are robust to different samples and specifications.

Date: 2013
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Working Paper: Financial Development and TFP Growth: Cross-Country and Industry-Level Evidence (2009)
Working Paper: Financial Development and TFP Growth: Cross-Country and Industry-Level Evidence (2009)
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DOI: 10.1080/09603107.2012.725931

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