Banking and Development

Oren Sussman and Joseph Zeira

No 1127, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper reformulates the well known financial development conjecture (FDC) and supplies some new empirical evidence in its favour. The financial development conjecture, namely, that there exist strong feedback effects between real and financial development, is described in this paper by use of the cost of financial intermediation. The theoretical part of the paper describes how specialization of banks can lead to such feedback effects, which work through the cost of financial intermediation. In the empirical part of the paper we use US cross-state data from banks' income statements to show that the cost of banking is negatively related with the level of real economic development.

Keywords: Banks; Economic Growth; Financial Development (search for similar items in EconPapers)
JEL-codes: E44 G21 O16 (search for similar items in EconPapers)
Date: 1995-02
References: Add references at CitEc
Citations: View citations in EconPapers (53)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1127 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:1127

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1127

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().