Financial development and growth in the short and long run
By: Raymond Fisman, Inessa Love.
Contributors: Love, Inessa.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10236; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10236.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Finance -- Econometric models.; Resource allocation -- Econometric models.; Industrialization -- Econometric models.
Description: "We analyze the relationship between financial development and inter-industry resource allocation in the short- and long-run.  We suggest that in the long-run, economies with high rates of financial development will devote relatively more resources to industries with a 'natural' reliance on outside finance due to a comparative advantage in these industries.  By contrast, in the short-run we argue that financial development facilitates the reallocation of resources to industries with good growth opportunities, regardless of their reliance on outside finance.  To test these predictions, we use a measure of industry-level 'technological' financial dependence based on the earlier work of Rajan and Zingales (1998), and develop new proxies for shocks to (short run) industry growth opportunities.  We find differential effects of these measures on industry growth and composition in countries with different levels of financial development.  We obtain results that are consistent with financially developed economies specializing in 'financially dependent' industries in the long-run, and allocating resources to industries with high growth opportunities in the short-run"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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