Long-Term Finance and Economic Growth

Dear Colleagues,

Irrespective of the consensus on the association between financial systems and economic development, the implications of long term finance on economic growth is still subject to considerable debate. In the post crisis period, the finance needs and the patterns of financing of the real economy are gaining renewed importance along with the stability of the financial market. However, the reliance of much of the previous literature on cross-country data has been problematic with a view to measurement issues, and, hence, the need for the special issue. For instance, in the case of mortgage provision, which has follow-on effects for an economy, countries follow different approaches. In the USA, the mortgage provision is based on securitisation with government guarantee (Fannie Mae, Freddie Mac), in the UK, mainly through building societies and commercial banks, in Germany by insurance companies, the Cajas de ahorro (non-banking financial institutions) in Spain and construction companies in Mexico. As a result of this considerable country level heterogeneity in the way finance is organised, cross-country measures are likely to be unreliable in capturing the essential functions of the financial systems worldwide.

How can we address the differences in the provision of long-term finance across countries? Is there use in relying on alternative measurement approaches or country specific studies where such heterogeneity can be isolated? Addressing such heterogeneity could proceed by looking at more detailed decomposition of the finance effects, e.g., at the composition of credit, differentiating impacts, according to income or inequality levels, and type of finance provision (such as financial institutions vs. investment markets, financial deepening, etc.). We invite papers, either conceptual papers on long term finance or empirical papers, which use innovative measurement approaches or country specific studies to analyse the implications of long-term finance on economic growth.

Prof. Thankom Arun
Dr. Philip Kostov
Co-Guest Editors

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• long-term finance
• economic growth
• measurement, country studies, type of finance