Financial depth versus more comprehensive metrics of financial development in tests of the finance-growth nexus

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F44555601%3A13440%2F24%3A43898428" target="_blank" >RIV/44555601:13440/24:43898428 - isvavai.cz</a>

Result on the web

<a href="https://www.sciencedirect.com/science/article/pii/S0939362523001127?via%3Dihub" target="_blank" >https://www.sciencedirect.com/science/article/pii/S0939362523001127?via%3Dihub</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1016/j.ecosys.2023.101173" target="_blank" >10.1016/j.ecosys.2023.101173</a>

Result language

angličtina

Original language name

Financial depth versus more comprehensive metrics of financial development in tests of the finance-growth nexus

Original language description

First, the paper gives a critical appraisal of recently proposed quality adjustments of the ratio of private credit to the gross domestic product (GDP) as a proxy for finance in empirical tests of the finance-growth nexus and cautions against such heuristic measures. Second, in response to the unidimensional feature of conventionally applied proxies for finance, the paper constructs a variable for financial development (FD metric) that measures the relative distance of a financial system from its best attainable performance in terms of depth, access, efficiency, and stability. The measurement is grounded in the principles of data envelopment analysis for ratio data and is built on structural indicators available in the Global Financial Development Database by the World Bank. Using annual data for 157 countries over the period 1993-2020, the paper then explores the finance-growth nexus using several financial metrics in panel-data regression models and considering nonlinearity in both a parametric and semiparametric manner. Economic growth is found to react negatively to finance, whereas this detrimental effect strengthens beyond a certain level of financial depth. In contrast, the access, efficiency, and stability of the financial sector are less important for growth. Hence, the findings lend weight to an economic policy focused primarily on a minimal size of the financial sector that permits its smooth operations, without the need to ensure that the financial sector performs qualitatively at its best.

Czech name

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Czech description

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Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

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OECD FORD branch

50206 - Finance

Project

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Continuities

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year

2024

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Economic systems

ISSN

0939-3625

e-ISSN

1878-5433

Volume of the periodical

48

Issue of the periodical within the volume

1

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

23

Pages from-to

"nestrankovano"

UT code for WoS article

001204311300001

EID of the result in the Scopus database

2-s2.0-85183566348