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Finance and local economic growth: New evidence from China

Chen, Jingzhu; Ji, Yuemei; (2023) Finance and local economic growth: New evidence from China. International Journal of Finance & Economics 10.1002/ijfe.2892. (In press). Green open access

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Abstract

We study the relationship between finance and growth using a sample of 275 Chinese cities from 2009 to 2018. We exclude bank loans to local governments through the local government financing vehicles (LGFVs) and construct a better financial development index which measures the level of loans extended by banks to enterprises and households. We find that financial development in the form of a higher loan-to-GDP ratio leads to lower economic growth. This negative relationship between finance and growth may be attributed to various mechanisms, including discrimination in bank lending, housing market bubbles, and an imbalance in growth between real and financial sectors.

Type: Article
Title: Finance and local economic growth: New evidence from China
Open access status: An open access version is available from UCL Discovery
DOI: 10.1002/ijfe.2892
Publisher version: https://doi.org/10.1002/ijfe.2892
Language: English
Additional information: Copyright © 2023 The Authors. International Journal of Finance & Economics published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, https://creativecommons.org/licenses/by/4.0/, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.
Keywords: Banks; China; city-level; economic growth; financial development
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of Arts and Humanities
URI: https://discovery.ucl.ac.uk/id/eprint/10177822
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