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33.1 Introduction 33.1 Introduction
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33.2 The Causality Debate 33.2 The Causality Debate
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33.3 Banks Matter 33.3 Banks Matter
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33.4 How Do Banks Matter? 33.4 How Do Banks Matter?
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33.5 The Role of Bank Competition 33.5 The Role of Bank Competition
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33.6 Banks and Industry Dynamics in Product Markets 33.6 Banks and Industry Dynamics in Product Markets
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33.7 Unintended Consequences of the Great Recession 33.7 Unintended Consequences of the Great Recession
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33.8 Conclusions 33.8 Conclusions
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References References
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33 Banking and Real Economic Activity
Get accessNicola Cetorelli is a Vice President at the Federal Reserve Bank of New York and the Head of the Financial Intermediation Function in its Research Group. His research has focused on the industrial organization and the corporate finance characteristics of the banking industry and the relationships with real economic activity. More recently he has worked on themes of international banking and on the evolution of financial intermediation. He represents the New York Fed on various Financial Stability Boards’ international working groups. He has published in a number of scholarly journals, among which the Journal of Finance, Journal of Economic Theory, American Economic Review, and Journal of International Economics. He has also written many articles in various policy journals and book chapters. He received his Ph.D in Economics from Brown University and a B.A. from the University of Rome, Italy.
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Published:07 April 2015
Cite
Abstract
The role of banks in real economic activity has been discussed at length, with arguments over whether bank development is merely a consequence of a growing economy, which simply demands a growing flow of intermediated funds, or whether instead banks themselves can spur further real economic activity. Both theory and empirical advances in recent years have put this causality debate to rest. Not only does banking matter but we now know better how. This chapter provides a panoramic view of the literature on this topic, from the earlier emphasis on causality, to its further investigation of the specific mechanisms through which banks affect the real economy and open issues on the table to carry research activity going forward.
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