Financialisation risks and economic performance
Jerome Creel (),
Paul Hubert () and
Fabien Labondance ()
No 21, Sciences Po publications from Sciences Po
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)
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://spire.sciencespo.fr/hdl:/2441/4712tvppdq9m ... tionrisks-jcreel.pdf (application/pdf)
Working Paper: Financialisation Risks and Econmic Performance (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spo:wpmain:info:hdl:2441/4712tvppdq9m6q5i7t579thpvf
Access Statistics for this paper
More papers in Sciences Po publications from Sciences Po Contact information at EDIRC.
Bibliographic data for series maintained by Spire @ Sciences Po Library ().