Financial Structure and Economic Development

Gurley, John G.; Shaw, Edward S.

doi:10.1086/450226

Cited by 691 publications

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“…The supply-leading role of financial institutions is to act as productive inputs in the production process and to transfer resources from traditional to modern sectors. This is echoed by Gurley and Shaw (1955) and Goldsmith (1969), who argue that more developed financial markets promote economic growth by mobilizing savings to finance the most productive investments. In a more recent study, Xu (2000) finds strong evidence that financial development, primarily via the investment channel, affects growth positively.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The earliest known proponents of the notion that finance could be an engine of growth are Schumpeter and Opie (1934); their view was later endorsed by Gurley andShaw (1955), McKinnon (1973) and Shaw (1973), among others. There is, however, another strand of the literature that dates back to Robinson (1952), arguing that economic growth drives the demand for financial services rather than the other way round.…”

Section: Introductionmentioning

confidence: 99%

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Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries

2015

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We revisit the relationship between financial development and economic growth in a panel of 52 middle-income countries over the 1980-2008 period. Using pooled mean group estimations in a dynamic heterogeneous panel setting, we show that there is an inverted U-shaped relationship between finance and growth in the long-run. In the short run, the relationship is insignificant. This suggests that too much finance can exert a negative influence on growth in middle-income countries. The finding of a non-monotonic effect of financial development on growth is confirmed by estimating a threshold model.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries

2015

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“…In the early 1970s, Shaw (1973;and Gurley & Shaw, 1955) and McKinnon (1973) put forward the claim that financial development fuelled by deregulation would stimulate growth in developing countries and EMEs. In the aftermath of World War II, governments around the world 4 Brazil, India, Indonesia, Mexico, Russia and Turkey.…”

Section: Financialisation In Emerging Economies: a Literature Reviewmentioning

confidence: 99%

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Karwowski

Stockhammer

2017

Economic and Political Studies

126

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Financialisation research has originally focussed on the US experience, but the concept is now increasingly applied to emerging economies (EMEs). There is a rich literature stressing peculiarities of individual country experiences, but little systematic comparison across EMEs. This paper fills this gap, providing an overview of the debate and identifying six financialisation interpretations for EMEs. These different interpretations stress (1) financial deregulation (2) foreign financial inflows, (3) asset price volatility, (4) the shift from bankbased to market-based finance, (5) business debt, and (6) household indebtedness. We construct and compare measures of the six financialisation interpretations across a sample of 17 EMEs from Latin America, emerging Europe, Africa and Asia, contrasting them with the US and UK, two financialised economies. We find considerable variation in financialisation experiences of EMEs. Asset price volatility is found across continents. Asia has been more exposed to capital inflows, stock markets have gained importance and private sector debt risen. In emerging Europe financial deregulation has been more pronounced with lower levels but strong increases in household debt. The picture is similar in South Africa, the African EME in the sample, where household debt is comparatively high. Financialisation in Latin America is weaker according to our measures.Keywords: Financialisation; Emerging markets; Financial instability; Asset price volatility; Heterodox economics JEL codes: F30; F34; G01; G12; G15; B50 Acknowledgements: We would like to thank our colleague Rex McKenzie for comments on the paper. The usual disclaimers apply.

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“…There is a long strand of literature, dating at least back to Gurley and Shaw (1955) that tests the effect of financial constraints on the firm's investment decision. Hubbard (1998) and Bond and Van Reenen (2007) are excellent reviews of this literature.…”

Section: Introductionmentioning

confidence: 99%

Credit Constraints, Sector Informality and Firm Investments: Evidence from a Panel of Uruguayan Firms

Gandelman

Rasteletti

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. Terms of use: Documents inThe unauthorized commercial use of Bank documents is prohibited and may be punishable under the Bank's policies and/or applicable laws. Copyright ©Inter-American Development Bank. This working paper may be reproduced for any non-commercial purpose. It may also be reproduced in any academic journal indexed by the American Economic Association's EconLit, with previous consent by the Inter-American Development Bank (IDB), provided that the IDB is credited and that the author(s) receive no income from the publication. This paper explores whether the extent of informality in a sector affects a firm's investment decision directly or indirectly through a credit availability channel. The dataset used in the estimation of the econometric models consists of an unbalanced panel of Uruguayan firms for the period 1997-2008. The results suggest that financial restrictions affect investment decisions in Uruguay, as an increase in credit to the private sector translates into higher investment rates. A one percentage point increase in overall credit growth translates into a one half percent increase in investment rates. It is also found that, although there is no direct effect of informality on the firm investment decision, there is an indirect effect through the borrowing channel. More specifically, financial restrictions reduce the amount of investment undertaken by Uruguayan firms, the effect being smaller if the firm operates in a sector with lower informality. Cataloging-in-PublicationJEL classifications: E26, G21, O4, O16

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Financial Structure and Economic Development

Cited by 691 publications

References 0 publications

Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries

Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Credit Constraints, Sector Informality and Firm Investments: Evidence from a Panel of Uruguayan Firms

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