Effect Of Finance On Growth Through More Efficient Utilization Of Technological Innovations
Source: Bank of Finland
This paper models the effects of financial development on economic growth through better or more efficient utilization of technological innovations. The model is based on the endogenous growth theory of Aghion and Howitt and its derivatives, especially the growth model of Aghion, Howitt and Mayer-Foulkes, which covers the effect of financial development on convergence. The main contribution of this paper is to model the innovation channel of finance explicitly. The paper focuses particularly on the interaction term between the measure of own innovation and financial development.