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Financial efficiency and economic growth: The case of Spain

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Abstract

This paper explores the connection between financial efficiency and economic growth. First, a theoretical model is presented in which financial efficiency enhances economic growth by means of increasing the marginal productivity of a broad concept of capital. Next, some data from the Spanish economy from 1962 to 1995 are explored using cointegration techniques. The main results point to a prominent role of bank institutions in channeling funds from savings to investment. Operative inefficiency of banks has damaged economic growth by providing a smaller amount of funds to the process of development. These results also suggest the existence of imperfections in Spanish capital markets. Finally, some indicators of financial repression such as negative interest rates and inflation seem to have had a deleterious impact on economic growth.

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Authors and Affiliations

  1. Universidad de Cantabria, Spain

    Blanca Sanchez-Robles

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  1. Blanca Sanchez-Robles
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This paper is part of a broader research project financed by Fundación FIES, CECA. Comments by Caneda, Cuñado, Martínez Chacón, Pérez de Villarreal, Termes, and Villaverde are gratefully acknowledged.

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Sanchez-Robles, B. Financial efficiency and economic growth: The case of Spain. International Advances in Economic Research 3, 333–351 (1997). https://doi.org/10.1007/BF02295212

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