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Does Bank Performance Contribute to Economic Growth in the European Union?

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Abstract

This paper uses dynamic GMM panel estimates to analyse the effects of the bank market structure and performance of banking institutions on economic growth in the European Union. The findings confirm the specific and not unanimous influence of bank market structure on economic growth. As to bank performance the results are very clear and statistically significant: the increase of the ratio equity to total assets contributes to the decrease of economic growth. Simultaneously, bank efficiency clearly contributes positively to economic growth, confirming the assumption that well-functioning banks are at least a necessary condition to the increase of the national income.

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Notes

  1. For more details on this problem, see, among others, Coelli et al. (1998) and Thanassoulis et al. (2007).

  2. The Bankscope database does not provide the number of employees for the bank sector of all EU countries. So, following the approach adopted, among others, by Weill (2004), we use the ratio of personnel expenses to total assets as a proxy for the price of labour.

  3. Concerning these issues, we are grateful to three anonymous referees for their suggestions, namely to the referee who gave the Borio (2012) and Claessens et al. (2012) references.

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Acknowledgements

The author would like to thank the participants at the 15th Annual Conference of the International Network for Economic Research (INFER), Orléans, 29 May–1 June 2013, and especially to Professor Camelia Turcu and to three anonymous referees for their most helpful comments, criticisms, and suggestions. The usual disclaimer remains.

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  1. Economics, ISEG, Universidade de Lisboa and UECE, R Miguel Lupi, 20, Lisboa, 1249-078, Portugal

    Cândida Ferreira

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  1. Cândida Ferreira
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Ferreira, C. Does Bank Performance Contribute to Economic Growth in the European Union?. Comp Econ Stud 58, 174–195 (2016). https://doi.org/10.1057/ces.2016.4

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