The Growth-Finance Nexus and European Integration: A Macroeconomic Perspective (download PDF 257 Kb)

Fabio Mariani and Pier Carlo Padoan

Abstract
In this paper we have looked at two issues. We have reconsidered some of the evidence on the growth-finance nexus, taking into account both different sources of growth and different national characteristics. Secondly, we have considered the implications of different growth-finance models in for the process of EU integration, as defined with respect to the targets set at the Lisbon summit, in March 2000.
Our estimation results show that: a) finance affects growth though different channels (GDP, investment, productivity, technology) all of which are relevant in EU integration; b) EU membership has played a role in boosting growth through productivity enhancement; c) Both banks and markets have an impact on growth; d) The rise of an innovation related bubble at the end of the 80's has increased the importance of market based finance in boosting technology driven growth, but credit finance has maintained a significant role in supporting investment driven growth (which may be associated in part with enhanced process innovation, itself related to IT); e) While there is evidence of similar growth finance relations across countries the growth-finance nexus is far from homogeneous. National specificities matter both because growth is driven by different factors with different intensity in different countries and because the relative weight of credit and market finance varies across countries. f) In general market finance is more relevant in countries where technology driven growth is more important.