Banking market structure, liquidity needs, and industrial growth volatility
نویسندگان
چکیده
Article history: Received 11 September 2012 Received in revised form 16 October 2013 Accepted 9 January 2014 Available online 17 January 2014 While the existing literature acknowledges the effect of banking structure on industrial growth as well as the effect of financial development on industrial growth and its volatility, we examine whether banking structure, given financial development, exerts any nontrivial effect on industrial growth volatility. We show that bank concentration magnifies industrial growth volatility, but reduces the volatility in sectors with higher external liquidity needs. The reduction in industrial growth volatility mostly reflects the smoothing in the volatility of real value added per firm growth. A variety of sensitivity checks show that our findings remain for different model specifications, banking market structure measures, liquidity need indicators, and omitted variables. © 2014 Elsevier B.V. All rights reserved. JEL classification: G2 O16 E32
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