Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174580
Authors: 
Fagiolo, Giorgio
Giachini, Daniele
Roventini, Andrea
Year of Publication: 
2017
Series/Report no.: 
LEM Working Paper Series No. 2017/30
Abstract: 
This paper extends the endogenous-growth agent-based model in Fagiolo& Dosi (2003) to study the finance-growth nexus. We explore industries where firms produce a homogeneous good using existing technologies, perform R&D activities to introduce new techniques, and imitate the most productive practices. Unlike the original model, we assume that both exploration and imitation require resources provided by banks, which pool agent savings and finance new projects via loans. We find that banking activity has a positive impact on growth. However, excessive financialization can hamper growth. Indeed, we find a significant and robust inverted-U shaped relation between financial depth and growth. Overall, our results stress the fundamental (and still poorly understood) role played by innovation in the finance-growth nexus.
Subjects: 
Agent-based Models
Innovation
Exploration vs. Exploitation
Endogenous Growth
Banking Sector
Finance-Growth Nexus
JEL: 
C63
G21
O30
O31
Document Type: 
Working Paper

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