What is new in the finance-growth nexus: OTC derivatives, bank assets and growth

Leonardo Becchetti and Nicola Ciampoli
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Nicola Ciampoli: Department of Economics, Universitˆ Tor Vergata

No wp40, Econometica Working Papers from Econometica

Abstract: We investigate the finance-growth nexus before and around the global financial crisis using for the first time OTC derivative data in growth estimates. Beyond the most recent Wacthel and Rousseau (2010) evidence which documents the interruption of the positive finance-growth relationship after 1989, we show that bank assets contribute indeed negatively, while OTC derivative positively or insignificantly with a much smaller effect in magnitude. At the same time the impact of the crisis is captured by a very strong negative effect of year dummies around the event. Our findings and their discussion aim to provide insights for policy measures aimed at tackling the crisis, disentangling positive from negative effects of derivatives and bank activity on the real economy and restoring the traditional positive link between finance and growth.

Keywords: finance and growth; OTC derivatives; banking; global financial crisis (search for similar items in EconPapers)
JEL-codes: E44 G10 O40 (search for similar items in EconPapers)
Pages: 27
Date: 2012-07
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: What is new in the finance-growth nexus: OTC derivatives, bank assets and growth (2012)
Working Paper: What is New in the Finance-growth Nexus: OTC Derivatives, Bank Assets and Growth (2012)
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