Banks' inefficiency and economic growth: a micro-macro approach

This paper offers a methodological contribution to the empirical analysis of the relationship between banking and economic growth by suggesting a new indicator for the state of development of the banking system based on a measure of bank microeconomic efficiency. This choice helps to overcome the problem of causality andtocapturetheeffectsofbanks'activityongrowth.Thisnewapproachisthen applied to analyse the relationship between the banking system and economic growth in the Italian regions, through a dynamic panel technique. The empirical results show the existence of an independent effect exerted by the efficiency of banks on regional growth.