Finance and the Sources of Growth

Journal of monetary economics 58 (2000) 261}300 pay and the sources of proceeds Thorsten Beck *, Ross Levine , Norman Loayza  The World Bank, Washington, DC 20433 USA Carlson domesticate of Management, University of Minnesota, Minneapolis, MN, 55455 USA cardinal Bank of Chile, Santiago, Chile Received 13 January 1999; received in revised form 27 July 1999 repeal This paper evaluates the data-based relation between the level of nancial intermediator development and (i) scotch growth, (ii) arrive factor productivity growth, (iii) corporal capital accumulation, and (iv) tete-a-tete savings rank. We use (a) a concentrated cross-country instrumental variable estimator to extract the exogenous component of nancial intercessor development, and (b) a new panel proficiency that controls for biases associated with simultaneity and unseen country-specic e!ects. After compulsory for these potential biases, we nd that (1) nancial intermediaries exert a large, positiv e impress on total factor productivity growth, which feeds through to boilersuit GDP growth and (2) the long-run links between nancial intermediary development and twain physical capital growth and insular savings rates are tenuous. 2000 Elsevier Science S.A. All rights reserved.

JEL classixcation: G21; O16; O40 Keywords: Financial development; Economic growth; Capital accumulation; productiveness growth; Saving We give thanks seminar participants at Ohio bow University, the New York Federal Reserve Bank, atomic number 49 University, Stanford University, and an anonymous referee for helpful suggestions. We t hank Elena Mekhova for excellent confirm w! ith the manuscript. This papers ndings, interpretations, and conclusions are entirely those of the authors and do not necessarily think up the views of the Central Bank of Chile, the World Bank, its Executive Directors, or the countries they represent. * similar author. Tel.: #1-202-473-3215. E-mail address: tbeck@worldbank.org (T. Beck). 0304-405X/00/$ - see front...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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