Revisiting the finance and growth nexus: A deeper look at sectors and instruments

Robert Unger

No 55/2018, Discussion Papers from Deutsche Bundesbank

Abstract: This paper investigates empirically whether the relation between finance and growth depends on a specific type of financing. I construct a novel panel data set for 34 high income countries over the time period from 1995 to 2014 based on financial accounts data. It allows distinguishing between the sectors that receive financing - households and corporates - as well as a variety of different financial instruments. For the household sector I find an inverted u-shaped relation that indicates that high levels of finance are negatively related to economic growth. In contrast, financing of corporates is largely neutral. Furthermore, when controlling for the sectoral allocation of financing, no specific instrument - e.g. bank credit or market financing, debt or equity financing - seems to be particularly harmful or beneficial for growth.

Keywords: banks; debt; economic growth; equity; finance; markets (search for similar items in EconPapers)
JEL-codes: C23 G10 G21 O11 O47 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:552018

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