Financial development and innovation-led growth
The purpose of this master's thesis is to study the effects of financial development on economic growth and investigate whether the impact differs between advanced and emerging economies. In addition, the study explores whether it matters for growth if the financial system is bank-based or market-based. As the main theoretical frame-work, the thesis introduces a simple Schumpeterian multisector growth model with credit constraints. The model explains why further development of different financial systems can enhance innovation-led growth, and also why a country’s distance to the technological frontier can affect its growth rate and how financial development is related to it.
The results of the empirical study show that financial development is positively and significantly related to economic growth, but the relationship appears to be bell-shaped; financial development affects growth positively at low levels, but after a certain threshold the impact is vanishing or even turns negative. The results are in line with earlier literature. The study also suggests that to facilitate growth in advanced economies, it is beneficial to develop financial markets, whereas emerging economies benefit most from the overall financial development. The development of financial institutions might have a negative impact on growth in advanced economies. The results confirm earlier findings of the convergence effect; financial deepening can help a country converge to the growth rate of the frontier, but it does not affect steady-state growth.
...
Keywords
Metadata
Show full item recordCollections
- Pro gradu -tutkielmat [29685]
License
Related items
Showing items with similar title or keywords.
-
Essays on emerging financial markets, political institutions and development differences
Lehkonen, Heikki (University of Jyväskylä, 2014) -
Road to unity? : Nordic economic convergence in the long run
Bruno, Lars; Eloranta, Jari; Ojala, Jari; Pehkonen, Jaakko (Routledge, 2022)This study examines Nordic economic convergence from the sixteenth to twentieth century respective of the economic leaders, in effect the UK before 1914 and USA thereafter. The paper uses a novel approach of combining the ... -
Economic Degrowth and the Collapse of Institutional Order : Theory and Propositions
Lamberg, Juha-Antti; Nykänen, Nooa; Taskinen, Jarmo (Suomalainen tiedeakatemia, 2022)Integrating insights from new institutional economics and studies on the collapse of past empires, we sketch a process model that links economic degrowth to the collapse of institutional orders. Our thought experiment ... -
Digital transformation, innovation and economic performance : a comparative study of Finland and India
Chitnis, Aditi (2018)Transformations in the information and communication technologies has had a profound effect on innovation and in turn the economic growth within countries. These changes have already been reflected in the corporate environment ... -
The emergence of intangible capital : human, social, and intellectual capital in nineteenth century British, French, and German economic thought
Turunen, Olli (University of Jyväskylä, 2016)Since the late 1950s the concept of human capital, understood as the stock of knowledge, skills, and abilities that determine individual productivity, has become one of the central tools with which economists explain ...