Croissance et finance

Various attempts have been made recently at explaining why productivity differences persist between rich and poor countries, and why some countries diverge from the world technology frontier in terms of their per capita GDP levels or growth rates, while other countries manage to catch up with the world frontier. We explore the role of credit market imperfections in explaining cross-country growth performance and cross-country convergence and divergence, following Lucas?s observation that capital does not flow from rich to poor countries even though the marginal return to capital is higher in the latter. We also analyse the interplay between credit market imperfections and macroeconomic policies. We show that interacting financial development with macroeconomic variables such as average productivity or output volatility in growth and finance regressions generates a rich set of new empirical predictions, e.g. on convergence and divergence, and on the growth effect of countercyclical macroeconomic policies. JEL Classification: F21, F30, F4, F5, G1, O14, O16, O4.