Financial Intermediary Development and Growth Volatility : Do Intermediaries Dampen or Magnify Shocks?
The authors extend the recent literature on the link between financial development and economic volatility by focusing on the channels through which the development of financial intermediaries affects economic volatility. Their theoretical model pr...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/11/1631799/financial-intermediary-development-growth-volatility-intermediaries-dampen-or-magnify-shocks http://hdl.handle.net/10986/19440 |
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okr-10986-194402021-04-23T14:03:43Z Financial Intermediary Development and Growth Volatility : Do Intermediaries Dampen or Magnify Shocks? Beck, Thorsten Lundberg, Mattias Majnoni, Giovanni ACCELERATOR ACCELERATOR EFFECT ASYMMETRIC INFORMATION BALANCE SHEETS BANK LENDING BANKS BONDS CAPITAL MARKETS CONSUMERS CORPORATE CONTROL CREDIT RATIONING DEMAND CURVE DEPOSITS DEVELOPED COUNTRIES ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EMPIRICAL ANALYSIS EQUILIBRIUM EXPORTS EXTERNAL FINANCE FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY DEVELOPMENT FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FUNCTIONAL FORMS GDP GDP PER CAPITA GROWTH RATE IMPORTS INCOME INCOME COUNTRIES INCOME GROUPS INFLATION INFLATION RATE INPUT PRICES INSTITUTIONAL ENVIRONMENT INTEREST RATE INTEREST RATES M2 MARGINAL PRODUCTIVITY MONETARY POLICIES MONETARY POLICY MORAL HAZARD NET WORTH OPEN ECONOMIES OPTIMIZATION OUTPUT OVERLAPPING GENERATIONS MODEL PER CAPITA INCOME POLICY DECISIONS POLICY MAKERS PREDICTIONS PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PRODUCTIVITY PROFIT MAXIMIZATION PROFITABILITY REAL GDP RESERVE REQUIREMENTS RETURNS TO SCALE SAVINGS SUPPLY CURVE TERMS OF TRADE TRADE SHOCKS VOLATILITY WEALTH FINANCIAL INTERMEDIATION ECONOMIC SHOCKS LOW-INCOME ECONOMIES MIDDLE-INCOME ECONOMIES ECONOMETRICS The authors extend the recent literature on the link between financial development and economic volatility by focusing on the channels through which the development of financial intermediaries affects economic volatility. Their theoretical model predicts that well-developed financial intermediaries dampen the effect of real sector shocks on the volatility of growth while magnifying the effect of monetary shocks-suggesting that, overall, financial intermediaries have no unambiguous effect on growth volatility. The authors test these predictions in a panel data set covering 63 countries over the period 1960-97, using the volatility of terms of trade to proxy for real volatility, and the volatility of inflation to proxy for monetary volatility. They find no robust relationship between the development of financial intermediaries and growth volatility, weak evidence that financial intermediaries dampen the effect of terms of trade volatility, and evidence that financial intermediaries magnify the impact of inflation volatility in low- and middle-income countries. 2014-08-19T18:22:19Z 2014-08-19T18:22:19Z 2001-11 http://documents.worldbank.org/curated/en/2001/11/1631799/financial-intermediary-development-growth-volatility-intermediaries-dampen-or-magnify-shocks http://hdl.handle.net/10986/19440 English en_US Policy Research Working Paper;No. 2707 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCELERATOR ACCELERATOR EFFECT ASYMMETRIC INFORMATION BALANCE SHEETS BANK LENDING BANKS BONDS CAPITAL MARKETS CONSUMERS CORPORATE CONTROL CREDIT RATIONING DEMAND CURVE DEPOSITS DEVELOPED COUNTRIES ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EMPIRICAL ANALYSIS EQUILIBRIUM EXPORTS EXTERNAL FINANCE FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY DEVELOPMENT FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FUNCTIONAL FORMS GDP GDP PER CAPITA GROWTH RATE IMPORTS INCOME INCOME COUNTRIES INCOME GROUPS INFLATION INFLATION RATE INPUT PRICES INSTITUTIONAL ENVIRONMENT INTEREST RATE INTEREST RATES M2 MARGINAL PRODUCTIVITY MONETARY POLICIES MONETARY POLICY MORAL HAZARD NET WORTH OPEN ECONOMIES OPTIMIZATION OUTPUT OVERLAPPING GENERATIONS MODEL PER CAPITA INCOME POLICY DECISIONS POLICY MAKERS PREDICTIONS PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PRODUCTIVITY PROFIT MAXIMIZATION PROFITABILITY REAL GDP RESERVE REQUIREMENTS RETURNS TO SCALE SAVINGS SUPPLY CURVE TERMS OF TRADE TRADE SHOCKS VOLATILITY WEALTH FINANCIAL INTERMEDIATION ECONOMIC SHOCKS LOW-INCOME ECONOMIES MIDDLE-INCOME ECONOMIES ECONOMETRICS |
| spellingShingle |
ACCELERATOR ACCELERATOR EFFECT ASYMMETRIC INFORMATION BALANCE SHEETS BANK LENDING BANKS BONDS CAPITAL MARKETS CONSUMERS CORPORATE CONTROL CREDIT RATIONING DEMAND CURVE DEPOSITS DEVELOPED COUNTRIES ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EMPIRICAL ANALYSIS EQUILIBRIUM EXPORTS EXTERNAL FINANCE FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY DEVELOPMENT FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FUNCTIONAL FORMS GDP GDP PER CAPITA GROWTH RATE IMPORTS INCOME INCOME COUNTRIES INCOME GROUPS INFLATION INFLATION RATE INPUT PRICES INSTITUTIONAL ENVIRONMENT INTEREST RATE INTEREST RATES M2 MARGINAL PRODUCTIVITY MONETARY POLICIES MONETARY POLICY MORAL HAZARD NET WORTH OPEN ECONOMIES OPTIMIZATION OUTPUT OVERLAPPING GENERATIONS MODEL PER CAPITA INCOME POLICY DECISIONS POLICY MAKERS PREDICTIONS PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PRODUCTIVITY PROFIT MAXIMIZATION PROFITABILITY REAL GDP RESERVE REQUIREMENTS RETURNS TO SCALE SAVINGS SUPPLY CURVE TERMS OF TRADE TRADE SHOCKS VOLATILITY WEALTH FINANCIAL INTERMEDIATION ECONOMIC SHOCKS LOW-INCOME ECONOMIES MIDDLE-INCOME ECONOMIES ECONOMETRICS Beck, Thorsten Lundberg, Mattias Majnoni, Giovanni Financial Intermediary Development and Growth Volatility : Do Intermediaries Dampen or Magnify Shocks? |
| relation |
Policy Research Working Paper;No. 2707 |
| description |
The authors extend the recent literature
on the link between financial development and economic
volatility by focusing on the channels through which the
development of financial intermediaries affects economic
volatility. Their theoretical model predicts that
well-developed financial intermediaries dampen the effect of
real sector shocks on the volatility of growth while
magnifying the effect of monetary shocks-suggesting that,
overall, financial intermediaries have no unambiguous effect
on growth volatility. The authors test these predictions in
a panel data set covering 63 countries over the period
1960-97, using the volatility of terms of trade to proxy for
real volatility, and the volatility of inflation to proxy
for monetary volatility. They find no robust relationship
between the development of financial intermediaries and
growth volatility, weak evidence that financial
intermediaries dampen the effect of terms of trade
volatility, and evidence that financial intermediaries
magnify the impact of inflation volatility in low- and
middle-income countries. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Beck, Thorsten Lundberg, Mattias Majnoni, Giovanni |
| author_facet |
Beck, Thorsten Lundberg, Mattias Majnoni, Giovanni |
| author_sort |
Beck, Thorsten |
| title |
Financial Intermediary Development and Growth Volatility : Do Intermediaries Dampen or Magnify Shocks? |
| title_short |
Financial Intermediary Development and Growth Volatility : Do Intermediaries Dampen or Magnify Shocks? |
| title_full |
Financial Intermediary Development and Growth Volatility : Do Intermediaries Dampen or Magnify Shocks? |
| title_fullStr |
Financial Intermediary Development and Growth Volatility : Do Intermediaries Dampen or Magnify Shocks? |
| title_full_unstemmed |
Financial Intermediary Development and Growth Volatility : Do Intermediaries Dampen or Magnify Shocks? |
| title_sort |
financial intermediary development and growth volatility : do intermediaries dampen or magnify shocks? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/11/1631799/financial-intermediary-development-growth-volatility-intermediaries-dampen-or-magnify-shocks http://hdl.handle.net/10986/19440 |
| _version_ |
1764439867220033536 |