Financial Development and Economic Growth: Evidence from Highly Disaggregated Italian Data

Cristian Barra, Sergio Destefanis and Giuseppe Lubrano Lavadera

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: In this paper we test the nexus between financial development and economic growth upon territorially highly disaggregated data from Italy, paying particular attention to the role of market power of local banks and cooperative banks. Profit efficiency, computed using the so-called “true fixed-effects” model proposed by Greene (J PROD ANAL 2005), is used as qualitative measure of financial development, while its quantitative measure is credit volume divided by gross domestic product. A growth model, similar to Hasan et al. (J BANK FINANC 2009), is specified and tested on panel data over the 2001-2010 period. Our estimates suggest that both indicators of financial development have a positive significant impact on GDP per worker, especially when considering cooperative banks and duopolistic markets. None of the above quoted results seems to be much affected by occurrence of the ongoing recession.

Keywords: Financial development; Economic growth; Profit efficiency; Frontier analysis; Banking efficiency (search for similar items in EconPapers)
JEL-codes: D24 G21 L89 (search for similar items in EconPapers)
Date: 2013-11-20
New Economics Papers: this item is included in nep-ban and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in Applied Financial Economics, 2014, 24(24), 1605-1615.

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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:346

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