Financial Development, Financial Fragility, and Growth

August 1, 2005

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Format: Chicago

Norman Loayza, and Romain Ranciere. Financial Development, Financial Fragility, and Growth, (USA: International Monetary Fund, 2005) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper studies the apparent contradictions between two strands of the literature on the effects of financial intermediation on economic activity. On the one hand, the empirical growth literature finds a positive effect of financial depth as measured by, for instance, private domestic credit and liquid liabilities. On the other hand, the banking and currency crisis literature finds that monetary aggregates, such as domestic credit, are among the best predictors of crises and their related economic downturns. This paper accounts for these contrasting effects based on the distinction between the short- and long-run effects of financial intermediation.

Subject: Banking crises, Financial crises, Financial markets, Financial sector development, Production, Production growth, Systemic crises

Keywords: Banking crises, Banking crisis, Economic growth, Error correction coefficient, Error-correction coefficient, Estimation result, Financial sector development, Growth empirics, Growth rate, PMG estimator, Pooled mean group estimation, Production growth, Regression equation, Short-run coefficient, Systemic crises, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/170
Stock No:

WPIEA2005170
ISBN:

9781451861891
ISSN:

1018-5941

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