EconPapers    
Economics at your fingertips  
 

Financialisation Risks and Econmic Performance

Jerome Creel (), Paul Hubert () and Fabien Labondance ()

No 2017-21, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: Drawing on European Union data, this paper assesses the long-standing mainstream view that financialisation improves growth. We measure financialisation with private credit to GDP and capture characteristics of banking sector fragility with the ratio of credit to deposits and the ratio of bank capital to assets. We test the impact of these variables on four measures of economic performance: the growth rates of GDP per capita, consumption per capita, investment and inequality. We observe that credit has no effect on economic performance. However, the potential riskiness of the banking sector measured by the ratio of credit to deposits decreases GDP per capita and contributes to increasing inequality whereas the ratio of capital to assets has a negative impact on GDP per capita growth through its negative effect on investment. This effect is driven by countries with low GDP per capita. We also find that the potential side effects of excessive financialisation have a negative effect on growth.

Keywords: Private Credit; Banking Sector fragility; Non Performing loans; Bank crisis (search for similar items in EconPapers)
JEL-codes: G10 G21 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-fdg
Date: 2017-10
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.ofce.sciences-po.fr/pdf/dtravail/WP2017-21.pdf (application/pdf)

Related works:
Working Paper: Financialisation risks and economic performance (2017) Downloads
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:1721

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 ().

 
Page updated 2019-11-21
Handle: RePEc:fce:doctra:1721