Summary of Finance and Productivity Growth
Federal Reserve Board, 2014
External financing and investment in innovation can boost a company’s productivity and a nation’s output.
Economists Oliver Levine and Missaka Warusawitharana confirm a link between companies’ use of external financing and their productivity growth, a nexus that sheds new light on economic activity following financial crises. Through their detailed study of a range of businesses in four European countries, Levine and Warusawitharana describe how external financing positively affects enterprises, especially when that financing funds innovation. Their conclusion: After a financial crisis, firms need continued access to credit to grow their businesses, which, in turn, lifts national and global economic growth. The paper’s rigorous scientific analysis is taxing, but getAbstract recommends its results to corporate executives and financial policy makers looking to advance their businesses and economies.
In this summary, you will learn
- What research finds to be the relationship between a company’s external financing and its future productivity growth, and
- How investment in innovation promotes growth.
About the Authors
Oliver Levine is an assistant professor of finance at the University of Wisconsin. Missaka Warusawitharana is a senior economist at the Board of Governors of the Federal Reserve.
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