Contents

Are financial activities harmful for regional growth? Contradictory evidence from the Indonesian panel data

Mansury, Yuri / Sohn, Wook

Abstract

Using high-frequency panel data for Indonesian provinces, we find that financial activities are associated with slower growth rates of productivity and output per capita. In particular, bank credit alone appears to inhibit growth more than the impact of credit and financial savings combined. This result contrasts starkly with the evidence from low-frequency panel, where the estimates suggest that bank credit promotes faster productivity and higher growth of per capita output. The contradictory evidence is attributable to the nonlinear growth dynamics of the finance-output nexus, where credit inhibits growth in the short run and promotes growth over the longer haul.

Issue Date
2014-04
Publisher
Routledge
Keywords Plus
ECONOMIC-GROWTH; INTERMEDIATION
Keywords(Author)
financial development; regional development; decentralization; Indonesia
DOI
10.1080/00036846.2014.975329
Journal Title
Applied Economics
Start Page
519
End Page
530
ISSN
0003-6846
Language
English
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