Banking and Real Economic Activity

Nicola Cetorelli

in The Oxford Handbook of Banking

Published in print January 2012 | ISBN: 9780199640935
Published online September 2012 | | DOI:

Series: Oxford Handbooks in Finance

 Banking and Real Economic Activity

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This article examines the links between financial development and real economic activity, focusing on the specific mechanisms, such as competition, which link bank activity to the real economy. Evidence suggests that bank concentration is inversely related to economic growth due to lower credit availability, although this effect varies across industries. For instance, concentration allows for the development of long-lasting lending relationships and this seems to enhance growth in industries where young firms are more dependent on external finance.

Keywords: financial development; economic growth; competition; bank concentration

Article.  8582 words. 

Subjects: Economics ; Financial Markets ; Public Economics

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