Is Finance Good for Growth? New Evidence from China

Arbeitspapier

We study the relationship between finance and growth using a sample of 275 Chinese cities during 2009-2018. We exclude a large amount of bank loans to local governments through the local government financing vehicles (LGFVs). This allows us to construct a new and better financial development index which measures the level of loans extended by banks to enterprises and households. Estimates from both GMM and Instrument Variables approaches indicate that financial development in the form of higher loan to GDP ratio leads to lower economic growth rate. We find that discrimination in bank lending, housing market bubbles and an unbalanced growth between real and financial sectors account for this negative relationship between finance and growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9882

Classification and Topics

• Classification: Wirtschaft ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure ; Economywide Country Studies: Asia including Middle East ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Economic History: Financial Markets and Institutions: Asia including Middle East
• Subject: China ; financial development ; economic growth ; banks ; city

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Chen, Jingzhu ; Ji, Yuemei
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/265917
• Last update: 20.09.2024, 8:22 AM CEST