Paper Credit and Product Market Effects of Banking Deregulation: Evidence from the French Experience
Many economists believe that an efficient financial industry is central to economic development. While this conjecture dates back at least to Schumpeter, economists have only relatively recently taken up the systematic study of the impact of finance on economic growth. Starting with King and Levine’s seminal paper (1993), a large number of studies have documented strong positive correlations between financial development, measured by the size of the financial sector, and growth and economic development. While these cross-country results are strikingly robust and consistent, they tell us little about the exact micro channels though which a more developed financial industry promotes growth. In Bertrand, Schoar and Thesmar (2005), we undertook such a study of the micro channels by looking at the impact of financial market deregulation on the allocation of credit across firms, firms’ behavior and product market dynamics. In particular, we analyzed the French banking deregulation in the mid-1980s.
Published in: DICE Report-Journal for Institutional Comparisons
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