Finance and growth: a macroeconomic assessment of the evidence from a European angle

Elias Papaioannou

No 787, Working Paper Series from European Central Bank

Abstract: This paper reviews the literature on the finance-growth nexus within a neoclassical growth framework, placing an emphasis on the policy implications in the current European environment, that has placed financial reforms high on the policy Agenda. While more research is needed to establish causality and verify the theoretical channels linking access to finance and growth, firm-level, industry-level, macro, and country-specific studies all tend to show a significant correlation between financial efficiency and economic performance. The empirical evidence hint that in underdeveloped and emerging countries financial development fosters aggregate growth mainly by lowering the cost of capital, while in advanced economies by raising total-factor-productivity. JEL Classification: G00, O

Keywords: development; Europe; finance; Financial Institutions; Financial Intermediation; Growth Decomposition; productivity (search for similar items in EconPapers)
Date: 2007-07
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2007787

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