|Generate QR code
Open Access
Subscription Access
The impact of a country’s level of development on the nexus between bank lending structure and economic growth
https://doi.org/10.32609/0042-8736-2021-10-51-70
Abstract
The purpose of this paper is to determine how the impact of the bank lending structure on economic growth differs depending on the level of a country’s development. The article provides suggestions on how much one can rely on the leading growth of corporate and consumer bank lending in order to promote economic growth. The study is based on the panel data for 211 countries for the period 1990—2019 using methods of qualitative and quantitative analysis. The authors have identified three groups of the countries where the impact of the bank lending structure on economic growth is different. In the least developed and low-income countries, the leading growth of both consumer and corporate lending has a positive impact on economic growth. As GDP per capita reaches 4,700—7,000 constant 2010 U.S. dollars, the outstripping growth of consumer lending begins to negatively affect economic growth, while corporate lending continues to have a positive impact. As GDP per capita continues to increase, corporate lending also begins to negatively affect economic growth. The GDP per capita threshold level, after which the negative impact of corporate lending begins, ranges from 6,000 to 42,000 constant 2010 U.S. dollars, some estimates allow us to specify these limits from 13,000 to 22,000 constant 2010 U.S. dollars. Such broad boundaries are determined by the fact that the role of the banking sector in investments financing may differ because of the financial sector model and the national economy structure. However, our results show that in the most developed and high-income countries, faster growth in corporate lending will not contribute to economic growth. The study also finds that the share of mortgage loans in GDP has a positive but insignificant effect on economic growth in all groups of the countries.
About the Authors
I. N. Gurov
Lomonosov Moscow State University
Russian Federation
Russian Federation
Ilya N. Gurov
Moscow
E. Y. Kulikova
Align Technology Research and Development
Russian Federation
Russian Federation
Elena Y. Kulikova
Moscow
References
1. Danilov Y. A. (2019). The present state of global scientific debate in the field of financial development. Voprosy Ekonomiki, No. 3, pp. 29 — 47. (In Russian). https://doi.org/10.32609/0042-8736-2019-3-29-47
2. Danilov Y., Buklemishev O., Abramov A. (2017). Urgency of financial markets’ and non-banking financial sector reform. Voprosy Ekonomiki, No. 9, pp. 28 — 50. (In Russian). https://doi.org/10.32609/0042-8736-2017-9-28-50
3. Doroshenko M. E., Dubinin S. K., Loleit A. S. (2019). Market-oriented vs. bank-oriented financial systems: Post-crisis balance shifts in Russia and abroad. Ekonomicheskaya Politika, Vol. 14, No. 5, pp. 100 — 123. (In Russian). https://doi.org/10.18288/1994-5124-2019-5-100-123
4. Kudrin A., Gurvich E. (2014). A new growth model for the Russian economy. Voprosy Ekonomiki, No. 12, pp. 4 — 36. (In Russian). https://doi.org/10.32609/0042-8736-2014-12-4-36
5. Stolbov M. I. (2008). Financial market and economic growth: Problem’s outline. Moscow: Nauchnaya Kniga. (In Russian).
6. Apergis N., Filippidis I., Economidou C. (2007). Financial deepening and economic growth linkages: A panel data analysis. Review of World Economics, Vol. 143, No. 1, pp. 179 — 198. https://doi.org/10.1007/s10290-007-0102-3
7. Arcand J. L., Berkes E., Panizza U. (2015). Too much finance? Journal of Economic Growth, Vol. 20, No. 2, pp. 105 — 148. https://doi.org/10.1007/s10887-015-9115-2
8. Bangake С., Eggoh J. C. (2011). Further evidence on finance-growth causality: A panel data analysis. Economic Systems, Vol. 35, No. 2, pp. 176 — 188. https://doi.org/10.1016/j.ecosys.2010.07.001
9. Beck T. (2012). The role of finance in economic development: Benefits, risks, and politics. In: D. C. Mueller (ed.). The Oxford handbook of capitalism. New York: Oxford University Press, pp. 161—203.
10. Beck T., Buyukkarabacak B., Rioja F., Valev N. (2012). Who gets the credit? And does it matter? Household vs. firm lending across countries. B. E. Journal of Macroeconomics, Vol. 12, No. 1, pp. 1 — 46.
11. Benmelech E., Dvir E. (2011). Does short-term debt increase vulnerability to crisis? Evidence from East Asian financial crisis. NBER Working Paper, No. 17468. https://doi.org/10.3386/w17468
12. Brown J. R., Fazzari S. M., Petersen B. C. (2009). Financing innovation and growth: Cash flow, external equity, and the 1990s R&D boom. Journal of Finance, Vol. 64, No. 1, pp. 151 — 185. https://doi.org/10.1111/j.1540-6261.2008.01431.x
13. Brown J. R., Martinsso G., Petersen B. C. (2012). Do financing constraints matter for R&D? European Economic Review, Vol. 56, No. 8, pp. 1512 — 1529.
14. Buyukkarabacak B., Valev N. T. (2010). The role of household and business credit in banking crises. Journal of Banking & Finance, Vol. 34, No. 6, pp. 1247—1256. https://doi.org/10.1016/j.jbankfin.2009.11.022
15. Carroll C. (2001). A theory of the consumption function, with and without liquidity constraints. Journal of Economic Perspectives, Vol. 15, No. 3, pp. 23 — 45. https://doi.org/10.1257/jep.15.3.23
16. Cihak M., Demirguf-Kunt A., Feyen E., Levine R. (2012). Benchmarking financial development around the world. World Bank Policy Research Working Paper, No. 6175.
17. Cournede B., Denk O., Hoeller P. (2015). Finance and inclusive growth. OECD Economic Policy Papers, No. 14. https://doi.org/10.2139/ssrn.2649801
18. De Gregorio J. (1996). Borrowing constraints, human capital accumulation, and growth. Journal of Monetary Economics, Vol. 37, No. 1, pp. 49—71. https://doi.org/10.1016/0304-3932(95)01234-6
19. Diamond D. W. (1984). Financial intermediation and delegated monitoring. Review of Economic Studies, Vol. 51, No. 3, pp. 393—414. https://doi.org/10.2307/2297430
20. Dombi A., Grigoriadis T. (2020). State history and the finance-growth nexus: Evidence from transition economies. Economic Systems, Vol. 44, No. 1, article 100738. https://doi.org/10.1016/j.ecosys.2019.100738
21. Eichengreen B., Park D., Shin K. (2013). Growth slowdowns redux: New evidence on the middle-income trap. NBER Working Paper, No. 18673. https://doi.org/10.3386/w18673
22. Greenwood J., Jovanovic B. (1990). Financial development, growth, and the distribution of income. Journal of Political Economy, Vol. 98, No. 5, pp. 1076 — 1107. https://doi.org/10.1086/261720
23. Group of Thirty (2013). Long-term finance and economic growth. Washington, DC.
24. Gutierrez E., Karmali N., Sourrouille D. (2018). Bank credit allocation in Latin America and the Caribbean. World Bank Policy Research Working Paper, No. 8571. https://doi.org/10.1596/1813-9450-8571
25. Hasan I., Hassan G., Kim S., Wu E. (2021). The real impact of ratings-based capital rules on the finance-growth nexus. International Review of Financial Analysis, Vol. 73, No. C, article 101628. https://doi.org/10.1016/j.irfa.2020.101628
26. Jappelli T., Pagano M. (1994). Saving, growth, and liquidity constraints. Quarterly Journal of Economics, Vol. 109, No. 1, pp. 83 — 109. https://doi.org/10.2307/2118429
27. Kurronen S. (2015). Financial sector in resource-dependent economies. Emerging Markets Review, Vol. 23, No. С, pp. 208—229. https://doi.org/10.1016/j.ememar.2015.04.010
28. Law S., Singh N. (2014). Does too much finance harm economic growth? Journal of Banking & Finance, Vol. 41, pp. 36—44.
29. Lee B.-S. (2012). Bank-based and market-based financial systems: Time-series evidence. Pacific-Basin Finance Journal, Vol. 20, No. 2, pp. 173 — 197.
30. Leon F. (2018). The credit structure database. CREA Discussion Paper Series, No. 2018-07. Center for Research in Economic Analysis, University of Luxembourg.
31. Leon F. (2019). Household credit and growth: International evidence. CREA Discussion Paper Series, No. 19-02. Center for Research in Economic Analysis, University of Luxembourg.
32. Levine R. (2002). Bank-based or market-based financial systems: Which is better? Journal of Financial Intermediation, Vol. 11, No. 4, pp. 398 — 428.
33. Levine R. (2004). Finance and growth: Theory and evidence. NBER Working Papers Series, No. 10766. https://doi.org/10.3386/w10766
34. Sahay R., Cihak M., N’Diaye P., Barajas A., Bi R., Ayala D., Gao Y., Kyobe A., Nguyen L., Saborowski Ch., Svirydzenka K., Yousefi S. (2015). Rethinking financial deepening: Stability and growth in emerging markets. IMF Staff Discussion Note, No. SDN 15/08. https://doi.org/10.5089/9781498312615.006
35. Schumpeter J. A. (1934). The theory of economic development. Cambridge, MA: Harvard University Press.
36. Tadesse S. (2002). Financial architecture and economic performance: International evidence. Journal of Financial Intermediation, Vol. 11, No. 4, pp. 429 — 454. https://doi.org/10.1006/jfin.2002.0352
Supplementary files
Review
For citations:
Gurov I.N., Kulikova E.Y. The impact of a country’s level of development on the nexus between bank lending structure and economic growth. Voprosy Ekonomiki. 2021;(10):51-70. (In Russ.) https://doi.org/10.32609/0042-8736-2021-10-51-70
Views:
1250
Email this article 
