BIS paper argues financial systems can grow too large

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A working paper, published by the Bank for International Settlements on July 17, considers the effect of financial system growth on productivity, finding an inverted U-shape relationship.

Authors Stephen Cecchetti and Enisse Kharroubi use data from 50 advanced and emerging countries from 1980-2009 to produce a panel regression, finding that beyond a certain point, a larger financial sector reduces productivity growth. The paper also finds a negative relationship between the speed of financial

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