a b s t r a c tIn this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost-and profit-efficiency estimates as quality measures of financial institutions. Contrary to the usual quantitative proxies of financial development, the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds. An improvement in bank efficiency spurs five times more regional growth then an identical increase in credit does. More credit provided by efficient banks exerts an independent growth effect in addition to direct quantity and quality channel effects.

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Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that German public export credit guarantees (Hermes guarantees) mitigate this friction to trade ows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the eect of export guarantees. The idea behind export promotion through public export credit agencies (ECAs) is that the private market is unable to provide adequate insurance for all risks associated with exports. As a consequence, rms' export activities are limited in the absence of insurance provision. Using a novel data set on guarantees we estimate the eect of guarantees in a static and dynamic panel model. We nd a statistically and economically signicant positive eect of public export guarantees on exports which indicates that export promotion is indeed eective. Furthermore, political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade.

With this paper we seek to contribute to the literature on the relation betweennance and growth. We argue that most studies in the eld fail to measure the quality of nancial intermediation but rather resort to using proxies on the size of nancial systems. Moreover, cross-country comparisons suer from the disadvantage that systematic dierences between markedly dierent economies may drive the result that nance matters. To circumvent these two problems we examine the importance of the quality of banks' nancial intermediation in the regions of one economy only: Germany. To approximate the quality of nancial intermediation we use cost eciency estimates derived with stochastic frontier analysis. We nd that the quantity of supplied credit is indeed insignicant when a measure of intermediation quality is included. In turn, the eciency of intermediation is robust, also after excluding banks likely to operate in multiple regions and distinguishing between dierent banking pillars active in Germany.

Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that German public export credit guarantees (Hermes guarantees) mitigate this friction to trade ows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the eect of export guarantees. The idea behind export promotion through public export credit agencies (ECAs) is that the private market is unable to provide adequate insurance for all risks associated with exports. As a consequence, rms' export activities are limited in the absence of insurance provision. Using a novel data set on guarantees we estimate the eect of guarantees in a static and dynamic panel model. We nd a statistically and economically signicant positive eect of public export guarantees on exports which indicates that export promotion is indeed eective. Furthermore, political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade.