Finance and growth nexus: An international analysis across cities

Abstract

We examine the relationship between finance and economic growth in the metropolitan areas of 75 countries at various stages of economic development in the period 2001–2015. Our analysis demonstrates an inverted-U shaped relationship between finance and growth. This relationship becomes even more significant in the areas of a country outside its largest financial centre, indicating that while these areas can benefit from financial development, they are also the most vulnerable. We show that large financial centres can have an impact on growth across their national economies, but in doing so they complement rather than replace local financial centres. Overall, our results highlight the risks associated with the excesses of financial development and lend evidence to support calls for more decentralised financial systems.

End-to-end real estate financialization: from developing to occupying through proptechs

“…These findings align with global discussions that show how national economies have unevenly distributed financial structures across them (Ioannou and Wójcik, 2021). In Canada, scholars identified a similar pattern.…”

Finance, Globalization, and Urban Primacy

“…More recent literature, however, points to an inverted-U shape relationship, whereby very high levels of financial activity may have adverse impacts on growth (e.g., Cecchetti and Kharroubi 2012). While finance and growth research focuses almost exclusively on country-level analysis, Ioannou and Wójcik (2021) corroborate the existence of an inverted-U shape relationship between growth and finance at both the country and city level. This indicates that as financial activity grows and its positive impacts on economic growth fades away, the impact of financial activity on urban primacy may be weaker in countries with larger (more developed) financial systems.…”

Finance-Growth Nexus in Bangladesh: Is it Important to Quantify Financial Development?

“…There are at least two theoretical causes that express why finance can influence economic growth. First, several major scholars in macroeconomics believe that finance might devour an excessive amount of human capital (e.g., skilled and brilliant employees) [13]. Cecchetti and Kharroubi [14] argue, for example, that finance, especially human resources, is competing with the rest of the economy.…”