Does financial activity cause economic growth?

Arbeitspapier

To clarify the causal links between financial activity and economic growth, three theoretical models are analyzed and a structural equation path models is estimated. In the modeling part, poverty traps result from large fixed costs or high proportions of real investment to run a financial sector. Human capital allocated to financial activities will improve long-run levels but may reduce growth rates in the short run. Empirically, based on data for 93 countries during the 1980-90 period, it is shown that during the 1980s finance was predominantly a supply-leading determinant of economic growth. Our analysis suggests, however, that this general finding cannot be confirmed for the less developed countries, thereby giving some support to the conclusions derived from the theoretical modeling.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Dresden Discussion Paper Series in Economics ; No. 01/01

Classification and Topics

• Classification: Wirtschaft ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Monetary Growth Models ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: financial development ; economic growth ; financial sector ; causality ; Finanzsektor ; Entwicklung ; Finanzintermediär ; Neue Wachstumstheorie ; Schätzung ; Theorie ; Welt ; Entwicklungsländer

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Graff, Michael ; Karmann, Alexander
• Event: Veröffentlichung
• (who): Technische Universität Dresden, Fakultät Wirtschaftswissenschaften
• (where): Dresden
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/48121
• Last update: 20.09.2024, 8:20 AM CEST