an article by Boris Cournède and Catherine L. Mann (OECD Economics Department, Paris, France) published in Comparative Economic Studies Volume 60 Issue 1 (March 2018)
Abstract
Finance has massively expanded and deeply changed across OECD countries over the past 50 years. Rapid growth of finance has been accompanied by a debt shift away from business towards household credit and, after 2000, a withering of equity capital.
Econometric investigations indicate that these changes have contributed to slowing down potential growth.
In OECD countries, higher credit/GDP ratios imply slower trend growth, especially when lending goes to households; by contrast, additional stockmarket funding boosts growth.
Moreover, these trends have contributed to widening inequalities.
There is a case for policymakers to focus on macro-prudential policy tools that optimise growth-stability trade-offs.
JEL Classification: D14, D63, G1, G2
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