Too much finance?

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Too Much Finance by Jean-Louis Arcand Enrico Berkes and Ugo Panizza IMF Working Paper 12_161.pdf (1.08 MB)

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https://link.springer.com/article/10.1007/s10887-015-9115-2

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https://doi.org/10.1007/s10887-015-9115-2
 http://hdl.handle.net/11603/30704

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UMBC Economics Department

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Author/Creator ORCID

https://orcid.org/0000-0001-5117-9918

Date

2015-05-08

Type of Work

journal articles
preprints
working papers
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Program

Citation of Original Publication

Arcand, Jean Louis, Enrico Berkes, and Ugo Panizza. “Too Much Finance?” Journal of Economic Growth 20, no. 2 (June 1, 2015): 105–48. https://doi.org/10.1007/s10887-015-9115-2.

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Abstract

This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We use different empirical approaches to show that there can indeed be “too much” finance. In particular, our results suggest that finance starts having a negative effect on output growth when credit to the private sector reaches 100% of GDP. We show that our results are consistent with the "vanishing effect" of financial development and that they are not driven by output volatility, banking crises, low institutional quality, or by differences in bank regulation and supervision.