Financial Development, Liberalisation and Productivity Growth

While recent developments in theoretical growth literature have emphasized the importance of finance and R&D efforts in explaining productivity growth, empirical evidence on this issue is rather scant. Using an innovation-based growth model, this project seeks to examine the roles of financial development and financial liberalisation in explaining cross-country productivity growth variations. To gain more insights into how the beneficial effect of finance can be enhanced and made more effective, we propose to examine the channels of transmission by decomposing productivity growth into technical change, efficiency change and scale effect.