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

Kód výsledku v 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>

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

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

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

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

Popis výsledku anglicky

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.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50206 - Finance

Projekt

—

Návaznosti

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Rok uplatnění

2024

Kód důvěrnosti údajů

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

Název periodika

Economic systems

ISSN

0939-3625

e-ISSN

1878-5433

Svazek periodika

48

Číslo periodika v rámci svazku

1

Stát vydavatele periodika

NL - Nizozemsko

Počet stran výsledku

23

Strana od-do

"nestrankovano"

Kód UT WoS článku

001204311300001

EID výsledku v databázi Scopus

2-s2.0-85183566348