Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265917 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9882
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We study the relationship between finance and growth using a sample of 275 Chinese cities during 2009-2018. We exclude a large amount of bank loans to local governments through the local government financing vehicles (LGFVs). This allows us to construct a new and better financial development index which measures the level of loans extended by banks to enterprises and households. Estimates from both GMM and Instrument Variables approaches indicate that financial development in the form of higher loan to GDP ratio leads to lower economic growth rate. We find that discrimination in bank lending, housing market bubbles and an unbalanced growth between real and financial sectors account for this negative relationship between finance and growth.
Subjects: 
China
financial development
economic growth
banks
city
JEL: 
O16
O18
O53
G21
N25
Document Type: 
Working Paper
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