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Quantifying the Impact of Financial Development on Economic Development

Jeremy Greenwood, Juan Sanchez and Cheng Wang

No 15893, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as intermediation spreads and the firm-size distribution for the years 1974 and 2004. It is then used to study the international data, using cross-country interest-rate spreads and per-capita GDP. The analysis suggests a country like Uganda could increase its output by 140 to 180% if it could adopt the world's best practice in the financial sector. Still, this amounts to only 34 to 40% of the gap between Uganda's potential and actual output.

JEL-codes: E13 O11 O16 O4 (search for similar items in EconPapers)
Date: 2010-04
New Economics Papers: this item is included in nep-dev and nep-mac
Note: EFG
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Citations: View citations in EconPapers (6) Track citations by RSS feed

Published as Jeremy Greenwood & Juan Sanchez & Cheng Wang, 2013. "Quantifying the Impact of Financial Development on Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 194-215, January.

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Related works:
Journal Article: Quantifying the Impact of Financial Development on Economic Development (2013) Downloads
Working Paper: Quantifying the Impact of Financial Development on Economic Development (2012) Downloads
Working Paper: Quantifying the Impact of Financial Development on Economic Development (2011) Downloads
Working Paper: Quantifying the Impact of Financial Development on Economic Development (2010) Downloads
Working Paper: Quantifying the impact of financial development on economic development (2010) Downloads
Working Paper: Quantifying the impact of financial development on economic development (2010) Downloads
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