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An Empirical Test of the Interaction Between Regional Financial Markets and Regional Growth

Year: 1994

Type: article

Abstract: Two models of the interaction between regional financial markets and regional production are examined. The first assumes that regional expenditures are determined by the regional interest rate, analogous to national IS-LM macroeconomic models. The second assumes that regional expenditures are constrained by the availability of regional credit available through financial markets. The first model implies regional financial markets have no effect on national growth if financial capital is perfectly mobile. However, the second model indicates regional growth is affected by regional financial markets. This difference is tested using gross product and commercial bank loan data for states from 1965 to 1985. A two-step procedure is used that (1) estimates the structural coefficients for each state through time series analysis, then (2) tests the explanatory power of these coefficients in a cross-section analysis of state growth rates. This analysis indicates that regional financial markets exhibit a positive impact on regional growth.

Source: Review of Regional Studies

DOI: 10.52324/001c.9034

Authors: Orley M. Amos, Jr., Majid Kermani, John R. Wingender

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

OpenAlex ID: W1535844201

FWCI:

Cites: 6

Cited by: 4

Related to: 10