Finance and Growth

The goal of this teaching is an understanding of how the financial system is crucial to economic growth. For this, the objective is to understand the nature, structure and functions of the financial system, its most recent evolution and the different, multiple dimensions through which it impacts the performance of economic agents. At the same time, this teaching aims to strengthen students' analytical skills on the topics being taught through quantitative elaborations and replications of the studies presented using real-world data.

Unlike in previous years, economic theories of growth will therefore not be the subject of this course, which, for the academic year 2023/24, is in strong discontinuity with the past given the new titular lecturer.

__________________________________________A (15 %)

A. THE FINANCIAL SYSTEM

A.1. What is meant by the financial system, the institutions of the FS. The functions of the financial system.

A.2. Financial innovation and the growth of the shadow banking system. 

A.3. Financial system stability and regulation. The risks of financial innovation: new players, new instruments, new practices, and the 2008 global financial crisis

__________________________________________ B (7.5 %)

B. INTRODUCTION TO THE CONCEPT OF ECONOMIC GROWTH

B.1 Economic growth in the short run. Defining economic growth (real GDP). A look at the components of the national accounts identity.

B.2. Economic growth in the long run. Living standards. Economic growth in the long run: productivity, technological progress, innovation, etc.

__________________________________________ C (7.5 %)

C. NOTIONS OF ECONOMETRICS TO UNDERSTAND THE EMPIRICAL STUDIES INCLUDED IN THE PROGRAM

C.1. Longitudinal data, time series, panel data. Multivariate regression analysis.

__________________________________________ D (60 %)

D. FINANCE-GROWTH NEXUS

D.1. Financial development and economic growth: theory

D.2. Financial development and economic growth: evidence 

D.3. A critical and wider review of the FGN (Itaman 2021)

__________________________________________ E (5 %)

E. New finance for growth

E.1. Sustainable Finance

E.2. FinTech

E.3. Trade finance

The multi-thematic and innovative nature of this course implies the absence of a main reference text. Instead, the scholarly article on which the course is built is "Levine, R. (2005), "Finance and growth: theory and evidence," Handbook of economic growth, Elsevier, 2005(1): 865-934."

All issues presented and discussed will still have a clear reference for study. Among the main ones:

- Mishkin+Eakins-2018, Financial Markets and Institutions, 9th edition: chapter 2.

- Levine, R. (2005), "Finance and growth: theory and evidence," Handbook of economic growth, Elsevier, 2005(1): 865-934.

- Levine R. (2021), "Finance, growth and inequality," IMF WP 21/164.

- Pindyck, Rubinfield (2018), Microeconomics, appendix: the basics of Regression

- EconCore project, The Economy, Chapter 1.

For the exact detail of the reference for each individual topic covered, please refer to the document "F&C2324 - Study References" which will be available on Studium.

For the theory part:

"Explain how the financial system is functional for economic growth with reference to the screening that banks exert on the demand for loans received."

"List the main reasons why some recent developments in the financial system may undermine its stability and growth, for example, with reference to the 2008/9 financial crisis."

For the analysis part:

"Using the available data, state the coefficient for the effect of increased public governance of banks on real GDP growth in the sampled countries (multivariate regression analysis)."

"After transforming nominal GDP to real, calculate its correlation with the amount of debt issuance and plot the series in a graph."