Financial stability and economic performance

Jerome Creel, Paul Hubert and Fabien Labondance

No 2013-24, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: This paper aims at establishing the link between economic performance, financial depth and financial stability in the European Union from 1998 to 2011. We use the standard framework both in terms of variables and econometric method of Beck and Levine (2004) to estimate these relationships. Our results suggest that the traditional result that financial depth positively influences economic performance (or components of aggregate dynamics like consumption, investment or disposable income) is not confirmed for European countries. Furthermore, we use different measures of financial instability (institutional index, microeconomic indicators, and our own statistical index derived from a Principal Component Analysis) and find that financial instability has a negative effect on economic growth.

Keywords: Financial depth; Aggregate dynamics; Financial stability; Banks; Non-performing loans; CISS; Z-score; Principal component analysis (search for similar items in EconPapers)
JEL-codes: G10 G21 O40 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.ofce.sciences-po.fr/pdf/dtravail/WP2013-24.pdf (application/pdf)

Related works:
Journal Article: Financial stability and economic performance (2015)
Working Paper: Financial Stability and Economic Performance (2014)
Working Paper: Financial stability and economic performance (2013)
Working Paper: Financial stability and economic performance (2013)
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:fce:doctra:1324

Access Statistics for this paper

More papers in Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE) Contact information at EDIRC.
Bibliographic data for series maintained by Francesco Saraceno ().