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dc.contributor.authorKARAGIANNIS STYLIANOSen_GB
dc.contributor.authorKVEDARAS VIRMANTASen_GB
dc.identifier.otherEUR 28324 ENen_GB
dc.identifier.otherOP LF-NA-28324-EN-Nen_GB
dc.description.abstractThis report provides empirical evidence on the relationship between financial development and economic growth in the European Union and the Euro area. It focuses on three issues: (i) the relationship between economic growth and financial depth taking into account its structure in terms of types of financing and fund receivers, (ii) the effects of financial cycles on the financial development-growth nexus, and (iii) simulation of impact of potential realignment of the financial sector. The results indicate that bank credit has a non-linear effect on growth with the peak of positive impact being close to 50% of gross domestic product. Furthermore, both the type of financing (bank credit, debt securities, or stock market) and fund receiver (households, firms, or financial corporations) matters in the financial depth-growth link. Conditionally on substantial financing of households, bank credit appears to have the most negative impact, whereas the stock market capitalization tends to have a positive one. The negative impact of bank financing appeared to be especially strong during housing market booms. Unconditional impact of debt securities tends to be negative, but they seem to cushion or even foster growth whenever economic growth rates are low relative to lending interest rates or stock market volatility is high. The impact of changes of the financial composition on economic growth rates is sensitive to the initial conditions of a particular economy.en_GB
dc.description.sponsorshipJRC.B.1-Finance and Economyen_GB
dc.publisherPublications Office of the European Unionen_GB
dc.titleFinancial development and economic growth: A European perspectiveen_GB
dc.typeEUR - Scientific and Technical Research Reportsen_GB
JRC Directorate:Growth and Innovation

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