Recovering the finance-growth nexus

Panicos O. Demetriades; Johan Rewilak

doi:10.1016/j.econlet.2020.109563

Recovering the finance-growth nexus

Panicos O. Demetriades^*, Johan Rewilak

^*Corresponding author for this work

University of Leicester

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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 language	English
Article number	109563
Journal	Economics Letters
Volume	196
Early online date	9 Sept 2020
DOIs	https://doi.org/10.1016/j.econlet.2020.109563
Publication status	Published - 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)

Keywords

Credit
Financial development
Financial fragility
Financial resilience
Growth
Non-performing loans
Sub-Saharan Africa

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10.1016/j.econlet.2020.109563

Recovering the finance-growth nexus
© 2020, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Accepted author manuscript, 177 KBLicence: CC BY-NC-ND 3.0

Cite this

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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",

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N2 - 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

AB - 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

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KW - Financial fragility

KW - Financial resilience

KW - Growth

KW - Non-performing loans

KW - Sub-Saharan Africa

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DO - 10.1016/j.econlet.2020.109563

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SN - 0165-1765

VL - 196

JO - Economics Letters

JF - Economics Letters

M1 - 109563

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Recovering the finance-growth nexus

Abstract

Bibliographical note

Keywords

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