Three essays on financial development and economic growth
The primary part of my dissertation investigates the potential effects of financial
sector development on economic growth. In order to reveal the nature of these effects,
I focus on the potential channels of influence from the financial to the real sector.
I investigate the link between the financial sector and economic growth focusing on
the role of the financial sector in funding innovative activities. To this aim, I construct
a model where the economy is driven by innovative activities that require both human
capital and external funding. My analysis shows that when certain conditions are
satisfied, there exists a unique equilibrium where the growth rate of the economy
is jointly determined by the levels of human capital and financial development. An
implication of this is that financial liberalization policies that do not adequately
address the fundamentals of the economy can cause bank failures and possibly a
financial crisis. Furthermore, the model suggests that, depending on the parameter
number of bankers and the other with a large number of bankers.
Also, I examine empirically whether financial development has any effect on the
rate of technological innovation using patent applications as a proxy for innovative
output. For a sample of twenty eight countries from 1970 to 2000, my analysis shows
that financial development is indeed significant in raising the growth rate of innovative
In addition, I investigate whether financial development enhances investment efficiency.
The efficiency channel hypothesis states that financial development may
increase the efficiency of investment by directing the funds to the most productive
uses. I examine if there is any evidence of financial development positively affecting
the efficiency of aggregate investment using developing countries as a sample.
Compared to the volume channel, the efficiency channel has received relatively little
attention until recently. I address the issue of the efficiency channel using two alternative
measures of aggregate investment efficiency. I find that, for developing countries,
financial development significantly and positively affects productivity of investment.
To my parents and my family
School:The Ohio State University
School Location:USA - Ohio
Source Type:Master's Thesis
Keywords:economic development investments patents
Date of Publication: