Too much finance?

Arcand, Jean-Louis L ; Berkes, Enrico ; Panizza, Ugo

In: Journal of Economic Growth 20, no 2(2015), p. 105-148

Abstract: This paper examines whether there is a threshold above which financial depth no longer has a positive effect on economic growth. We use different empirical approaches to show that financial depth starts having a negative effect on output growth when credit to the private sector reaches 100% of GDP. Our results are consistent with the “vanishing effect” of financial depth and that they are not driven by endogeneity, output volatility, banking crises, low institutional quality, or by differences in bank regulation and supervision.

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Academic Departments > International Economics Department
Research Clusters > Conflict, Dispute Settlement and Peacebuilding
Research Clusters > Development Policies and Practices
Research Clusters > Culture, Identity and Religion
Research Clusters > Trade and Economic Integration
Research Clusters > Migration and Refugees
Research Clusters > Finance and Development
Research Clusters > Governance
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 Record created 2015-10-05, last modified 2017-10-24

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