Changes in the relationship between the financial and the real sector and the present financial crisis in the European Union

Amaia Altuzarra, Patricia Peinado (), Carlos Rodriguez and Felipe Serrano

Working papers from Financialisation, Economy, Society & Sustainable Development (FESSUD) Project

Abstract: In the first part of the paper we confirm the existence of a financial “vanishing effect” for the Eurozone countries since the 90s. In the 70s and 80s -when credit over GDP was still moderate- credit growth still had a positive effect on real growth, but thereafter during the financialization heydays when credit reached a high level, that link broke apart. In the second part we put forward that a main reason explaining why increasing financial deepening stopped to have a positive effect on growth might be due to NFCs having used an important part of their external resources for the acquisition of securities instead of financing real investment. This process of NFC finacialization and the observed increase in their selffinancing ability are two key reassuring indicators showing the disconnection of NFC financial behaviour with their investment decisions

Keywords: bank credit; economic growth; NFC financing gap; NFC investment (search for similar items in EconPapers)
JEL-codes: C33 G01 G21 O47 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2016-06-30
New Economics Papers: this item is included in nep-cfn, nep-eec and nep-fdg
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Citations: View citations in EconPapers (2)

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