Research Discussion Papers, Bank of Finland
Regional growth and finance in Europe: Is there a quality effect of bank efficiency?
(), Michael Koetter
() and Michael Wedow
Abstract: In this study, we test whether regional growth in 11
European countries depends on financial development and suggest the use of
cost- and profit-efficiency estimates as quality measures for financial
institutions. Contrary to the usual quantitative proxies for financial
development, the quality of financial institutions is measured in this
study as the relative ability of banks to intermediate funds. An
improvement in bank efficiency spurs five times more regional growth than
does an identical increase in credit. More credit provided by efficient
banks exerts an independent growth effect in addition to the direct
quantity and quality channel effects.
Keywords: bank performance; regional growth; bank efficiency; Europe; (follow links to similar papers)
JEL-Codes: G21; O16; O47; O52; (follow links to similar papers)
27 pages, May 18, 2009
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