Financial stability and economic performance

Jerome Creel, Paul Hubert and Fabien Labondance

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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 deppth; Aggregate dynamics; financial stability; banks; non perrforming loans; CISS; Z score; principal component analysis (search for similar items in EconPapers)
Date: 2013-12
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01064263
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Citations: View citations in EconPapers (1)

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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)
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