Reassessing the law, finance, and growth nexus after the recent Great recession

The paper provides a reassessment of the relationship between financial structure, financial development, and economic growth conducting cross-section and panel econometric analyses for a sample of 62 countries over 1980-2016. In line with the traditional literature, we confirm the existence of a positive cross-country relationship between the legal system, financial development, and growth even including the experience of the recent Great recession; in addition, when jointly assessing the effect of financial structure and financial development on growth, it emerges that a more bank-oriented economy enjoys higher benefits, in terms of long-run real GDP per capita growth, than a market-oriented one. When we consider variations across countries and over time, we find that both financial structure and financial development affect growth but in an opposite way as the cross-section analysis. In particular, when we control for their joint effect on growth, we observe a positive impact of market-based financial systems, and a negative impact of the overall financial development. We also provide evidence of the existence of a positive and significant relationship between economic growth and Shadow banking during the 20022016 period, highlighting the crucial role played by non-bank financial intermediation in complementing traditional banking and in affecting the real economy. (C) 2018 Elsevier B.V. All rights reserved.