Recovering the finance-growth nexus

Panicos O. Demetriades*, Johan Rewilak

*Corresponding author for this work

Research output: Contribution to journalArticle

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
Original languageEnglish
Article number109563
JournalEconomics Letters
Volume196
Early online date9 Sep 2020
DOIs
Publication statusPublished - 1 Nov 2020

Bibliographical note

© 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)

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