nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2008‒10‒07
three papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Banking Structure and Credit Growth in Central and Eastern European Countries By Burcu Aydin
  2. Economic growth determinants in Latin American region: An empirical analysis based on bank systems role By Carton, Christine; Ronquillo , Cely
  3. Distress in the financial sector and economic activity By Mark A. Carlson; Thomas B. King; Kurt F. Lewis

  1. By: Burcu Aydin
    Abstract: Recent developments have increased questions about vulnerabilities in Central and Eastern European Countries (CEE) that are experiencing credit booms. This paper analyzes the role of foreign-owned banks in these credit booms. The results show that the CEE countries depend on foreign banks, and these foreign banks depend on interbank funding. Lending by foreign banks seems driven by economic growth and interest rate margins. This lending appears independent of economic but not financial conditions in the foreign bank's home country.
    Date: 2008–09–15
  2. By: Carton, Christine; Ronquillo , Cely
    Abstract: This article examines a theoretical framework for an explanation for the processes of growth experienced by the economies of Latin America. The economic literature is devoted primarily to analyze this topic based on the use of the macroeconomic production function as the main analytical concept. It is proposed to validate empirically the interaction between financial development and human capital as determinant of the processes of growth for the Latin American region. Thus, the major contribution of this study is the application of a translog production function which allows the analysis of the interaction that can exist between explanatory variables. Estimates are made with a panel data from 1980 to 2004, based on a sample of 16 countries representing the Latin American region. We found significant results suggest that financial development is as important as human capital for economic growth.
    Keywords: América Latina;Crecimiento;Desarrollo financiero;Capital humano;Datos en panel
    JEL: O41 N16 C23
    Date: 2008–01–16
  3. By: Mark A. Carlson; Thomas B. King; Kurt F. Lewis
    Abstract: This paper explores the relationship between the health of the financial sector and the rest of the economy. We develop an index of financial sector health using a distance-to-default measure based on a Merton-style option pricing model. Our index spans over three decades and appears to capture periods when financial sector institutions were strong and when they were weak. We then use vector autoregressions to assess whether our index of financial-sector health affects the real economy, in particular non-residential investment. The results indicate that our index has a considerable impact. Moreover, we find that this financial channel amplifies changes in investment resulting from shocks to non-financial firm profitability.
    Date: 2008

This nep-fdg issue is ©2008 by Iulia Igescu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.