Fat'kin A.V.South Ural State University (National Research University), Chelyabinsk, Russian Federation andfatkin@yandex.ru ORCID id: not available
Krinichanskii K.V.Financial University under Government of Russian Federation, Moscow, Russian Federation kkrin@fa.ru ORCID id: not available
Subject The article explores the relationship of financial and economic development in Russian regions. The focus is on a transmission channel of this relationship, i.e. small and medium-sized enterprises. Objectives The aim is to check the significance of the transmission mechanism from finance to growth through the small and medium-sized enterprises channel, to test the hypothesis about the presence or absence of nonlinearity in the operation of this transmission mechanism. Methods We tested the hypotheses, applying the analysis of panel data under a system generalized method of moments. The said method is commonly used in models with endogenous regressors and unobserved specific effect. The Bank Loans to Gross Regional Product ratio serves as an indicator of financial system development at the regional level. To identify the nonlinearity, we add the quadratic indicator to the regression equation. Results The studied relationship seems to work differently in different regions. The positive impact of the bank credit limit on indicators that characterize the development of the small and medium-sized enterprise sector can be traced only in regions with a relatively low financial development. Regions with high level of financial development suffer from a negative effect of financial depth on the development of small and medium-sized enterprises. Conclusions The findings may be useful for the financial regulator and executive authorities of the Russian Federation for setting targets of financial development of regions and formulating the policy that improves the response of economic agents to the increase in the bank credit limit.
Keywords: financial system, banking intermediation, economic advancement, small and medium-sized enterprises
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