Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251097 
Year of Publication: 
2020
Series/Report no.: 
EERI Research Paper Series No. 05/2020
Publisher: 
Economics and Econometrics Research Institute (EERI), Brussels
Abstract: 
We depart from the empirical literature on testing the finance led growth. Instead of regression analysis, we use a semi-endogenous growth model, which identifies two productivity growth paths: a steady state and a transitional path. Steady state growth is anchored by population growth. In the transitional dynamic, productivity growth depends on the typical factors growth rates, and excess knowledge, which is the deviation of TFP in the financial sector from steady state growth. TFP is endogenous. It is an increasing function of global research efforts, which is driven by the proportion of population in developed countries that is engaged in research in finance, and the stock of human capital. We find positive evidence for this theory of TFP in the data of ten developed European countries and the United States. We also found some evidence for finance-led-growth, albeit weaker after the past Global Financial Crisis.
Subjects: 
Semi endogenous growth
finance
productivity growth
JEL: 
O40
E10
Document Type: 
Working Paper

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