Recovering the finance-growth nexus

Abstract

We show that the finance-growth nexus can be recovered by using quality adjusted measures of financial development. Specifically, we utilize three World Bank financial fragility indicators – the Z-score, a measure of liquidity and a measure of impaired loans – to construct quality adjusted measures of private credit to GDP. Our findings suggest that the finance-growth nexus is alive and kicking, as long as banks use sound lending practices to prevent the buildup of non-performing loans. We also show that our results hold in Sub-Saharan Africa — a region where the finance-growth nexus could potentially make a big difference

Publication DOI: https://doi.org/10.1016/j.econlet.2020.109563
Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
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Additional Information: © 2020, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/ Funding: Economic and Social Research Council, United Kingdom (award reference ES/N013344/2)
Uncontrolled Keywords: Credit,Financial development,Financial fragility,Financial resilience,Growth,Non-performing loans,Sub-Saharan Africa,Finance,Economics and Econometrics
Publication ISSN: 1873-7374
Full Text Link:
Related URLs: https://www.sci ... 0303426#d1e1454 (Publisher URL)
http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2020-11-01
Published Online Date: 2020-09-09
Accepted Date: 2020-09-08
Authors: Demetriades, Panicos O.
Rewilak, Johan (ORCID Profile 0000-0001-5337-8873)

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