Advances in Economics and Business Vol. 4(2), pp. 87 - 101
DOI: 10.13189/aeb.2016.040203
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What Works on Economic Growth? Funds Efficiency or Growth Opportunities


Chiou-Rung Chen 1,*, Chai-Liang Huang 2, Feng-Hueih Huarng 3
1 Department of Educational Management, National Taipei University of Education, Taiwan
2 Department of Finance, National Chung Cheng University, Taiwan
3 Department of Business Administration, Southern Taiwan University, Taiwan

ABSTRACT

This study investigates the impacts of funds utilization efficiency and growth opportunities on the finance-growth nexus for 49 countries from 1960 to 2004. Results show that the funds utilization efficiency, both of assets and liability allocation efficiency, and growth opportunities are the predominant factors in the finance-growth nexus. Financial intermediaries who utilize funds efficiently and possess fine growth opportunities are capable of accelerating real economic growth. In contrast, financial intermediaries who utilize funds inefficiently and lack fine growth opportunities hinder economic growth. The result implies governments should formulate policies to improve funds utilization efficiency and growth opportunities rather than to just monotonically promote financial development or income levels. Furthermore, the predominance of funds utilization efficiency and growth opportunities in finance-growth nexus is more potent in developing countries than in developed countries. Finally, the results are robust to discontinuity caused by operation of European Monetary Unification (EMU), and to models subsuming stock market measures.

KEYWORDS
Economic Growth, Funds Efficiency, Growth Opportunities

Cite this paper
Chiou-Rung Chen , Chai-Liang Huang , Feng-Hueih Huarng . "What Works on Economic Growth? Funds Efficiency or Growth Opportunities." Advances in Economics and Business 4.2 (2016) 87 - 101. doi: 10.13189/aeb.2016.040203.