Nathaniel Young from EBRD will present "Banking and Growth: Evidence from a Regression Discontinuity Analysis".
Abstract: This paper investigates banking expansion and economic growth. Contrary to theoretical, cross-country and historic evidence from the US, several recent microeconomic studies from developing country settings do not find enduring banking effects. I exploit exogenous expansion of bank branches in India, driven by a previously unstudied policy reform from 2005. Iterating a regression discontinuity design, I trace branch growth before and after the reform along with responses from the real economy. I find strong causal evidence that the expansion of financial intermediation led to positive outcomes in both agriculture and manufacturing, and confirm growth in local GDP using nightlights data.