nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2018‒03‒19
three papers chosen by
Georg Man

  1. Economic Growth, Volatility and Their Interaction: What’s the role of finance? By Sergio Henrique Rodrigues da Silva; Benjamin Miranda Tabak; Daniel Oliveira Cajueiro; Dimas Mateus Fazio
  2. Financial Stability as a Public Policy Goal to Increase Local Economic Development: an Empirical Investigation from Italian Labour Market Areas By BARRA, Cristian; ZOTTI, Roberto
  3. Access to finance for firms in Malta: Estimating the impact of reduced credit By Sandra Zerafa

  1. By: Sergio Henrique Rodrigues da Silva; Benjamin Miranda Tabak; Daniel Oliveira Cajueiro; Dimas Mateus Fazio
    Abstract: This paper examines the relation between financial depth and the interaction of economic growth and its volatility. We use a sample of 52 countries for the period 1980–2011, and our main finding is that, at moderate levels of financial depth, further deepening increases the ratio of average economic growth to volatility; however, as financial depth gets higher, this relation reverts, and the rise in volatility overcomes that of economic growth. This result is obtained both in the medium and long run; however, the peak of the relation seems to be lower in the medium run (domestic credit-to-GDP ratio around 40% to 55%) than in the long run (around 75% to 99%). This suggests that increasing the domestic credit-to-GDP ratio may intensify relative volatility in the medium term, but still may raise relative long-term growth before the long-run threshold is achieved
    Date: 2018–03
  2. By: BARRA, Cristian (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); ZOTTI, Roberto (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: Financial stability is a prerequisite for sustainable economic development. Assuming that financial stability is a public good, with a negative effect on social welfare and on economic development when risks are not properly controlled, will make regulators ensuring the smooth functioning of the system, promoting regional development and making the health of the financial institutions. This paper contributes to the literature on the relationship between financial stability and growth within the regions of one country, implying that institutional, legal and cultural factors are more adequately controlled and financial markets more accurately bounded. Using a rich sample of Italian banks over the 2001–2012 period, the paper addresses whether different measures of financial distress affect economic development of labour market areas in Italy. Results show that financial stability has a positive effect on local economic development mainly explained by the bank’s return on average assets.
    Keywords: Banks; Local economic development; Financial stability; Labour market areas
    JEL: C20 G21 G28 R11
    Date: 2018–02–22
  3. By: Sandra Zerafa
    Abstract: This note looks at changes in the access to finance of firms over time. From a demand side, results from the Survey on the Access to Finance of Enterprises (SAFE) indicate that bank financing still remains the most used source. From a supply-side point of view, the Bank Lending Survey (BLS) indicates that Maltese banks have resorted to stricter credit conditions rather than quantity restrictions. The relationship between credit to NFCs and GDP growth appears to have weakened since the crisis, such that an increased level of credit has a smaller impact on real output. This may reflect structural changes in the Maltese economy that have taken place over the last decade.
    JEL: E51 C5 G00

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