Finance and the sources of growth

Thorsten Beck, Ross Levine () and Norman Loayza ()

No 2057, Policy Research Working Paper Series from The World Bank

Abstract: The authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources-total factor productivity growth, physical capital accumulation, and private saving. They use (1) a pure cross-country instrumental variable estimator to extract the exogenous component of banking development and (2) a new panel technique that controls for country-specific effects and endogeneity. They find that: Banks do exert a large, causal impact on total factor productivity growth, which feeds through to overall GDP (Gross Domestic Product) growth. The long-run links between banking development and both capital growth and private savings are more tenuous.

Keywords: Industrial Economics; Economic Growth; Economic Theory & Research; Inflation; Financial Sector Policy; Financial Intermediation; Social Policy; Regulatory Regimes; Legal Products; Legal Reform; Judicial System Reform; Legislation (search for similar items in EconPapers)
Date: 1999-02-28
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Citations: View citations in EconPapers (39)

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Journal Article: Finance and the sources of growth (2000)
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