آیا بی ثباتی توسعه ی مالی بر بی اثباتی توسعه ی صنعتی تاثیر میگذارد

This paper investigates whether volatility of financial development plays a role in determining industrial growth volatility. Three key findings emerge. First, overwhelming evidence supports the view that more volatile financial development raises the industrial volatility in sectors that rely more on external liquidity. Second, the positive effect of financial volatility on industrial volatility mainly works through the increase in fluctuations of the growth of real value added per firm and the number of firms, with the former effect more prominent. Third, both the volatilities of the banking sector and the stock market positively associate with higher industrial growth volatility, which contrasts sharply with the finding in the literature that financial structure generally does not matter.

The theoretical and empirical growth literature has extensively explored the effect of financial development on economic growth. Theoretically, financial intermediaries and financial markets mitigate the costs of acquiring information, enforcing contracts, and making transactions. That is, the development of financial systems changes the incentives and constraints facing economic agents through producing information and allocating capital, monitoring firms and exerting corporate governance, ameliorating risk, pooling saving and easing exchange, with positive ramifications on economic growth (e.g., Acemoglu and Zilibotti, 1997, Bencivenga and Smith, 1991, Greenwood and Jovanovic, 1990, Khan, 2001 and King and Levine, 1993a). Empirically, cross-country studies (e.g., Beck and Levine, 2004, Goldsmith, 1969, King and Levine, 1993b, Levine et al., 2000, Levine and Zervos, 1998 and McCaig and Stengos, 2005) offer strong and robust evidence supporting the view that both well-functioning banking systems and better-developed stock markets independently spur economic growth. That is, banking systems and stock markets provide different, but complementary, growth-enhancing financial services to the economy. Tadesse (2002) argues that market-based systems outperform bank-based systems among countries with developed financial sectors and that bank-based systems outperform market-based systems among countries with underdeveloped financial sectors. Levine (2002), however, finds that after controlling for overall financial development, cross-country comparisons do not suggest that distinguishing between bank-based and market-based financial systems matters as a first-order concern in understanding the process of economic growth. Using industry-level data, Beck and Levine (2002) confirm that greater financial development accelerates the growth of financially dependent industries. Financial structure per se, however, does not help explain the differential growth rates of financially-dependent industries across countries. Considering firm's access to external finance, Demirgüç-Kunt and Maksimovic (2002) find that firms do not grow faster in either market-based or bank-based financial systems. That is, the overall level of financial development matters for economic growth, rather than the development of a specific component of the financial systems. See Levine, 1997 and Levine, 2005, Ang (2008) and Beck (2009) for detailed survey on the finance-growth nexus.

I n an interesting paper, Raddatz (2006) provides strong and robust evidence, showing that the development of financial intermediaries and stock markets, primarily by smoothing fluctuations of growth in output per firm and secondly by reducing the volatility of the number of firms, reduces the growth volatility of industrial sectors with higher liquidity needs. As a complement, this paper investigates, given the level of financial development, whether the volatility of financial development plays a role in affecting the industrial volatility. Using the approach of Rajan and Zingales (1998) and the data provided by Raddatz (2006), we augment with additional measures on the financial development volatility and generate several interesting observations. First, significant evidence supports the hypothesis that volatile financial development increases the industrial volatility in sectors with higher liquidity needs. Second, the positive effect of financial volatility on industrial volatility mainly flows through the increase in fluctuations of the growth of real value added per firm, and then, to a lesser extent, through the increase in the volatility of the number of firms' growth. Third, while the existing literature sometimes finds that financial structure does not affect output growth, we report evidence that both volatilities of the banking system and stock markets positively and significantly associate with higher industrial volatility in sectors that depend on more external liquidity. Thus, financial structure does matter, at least, through the channel of volatility. Further analysis shows that our findings remain robust to different volatility measures of financial development, alternative indicators of liquidity needs, and the inclusion of key macroeconomic variables along with their volatilities.