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The Finance–Growth Thesis: A Sceptical Assessment-super- †

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  • Thomas Barnebeck Andersen
  • Sam Jones
  • Finn Tarp

Abstract

Financial liberalisation is widely seen as key to promoting financial development and unlocking growth in developing countries. While this thesis has been backed by an extensive literature, we show that it rests on weak theoretical and empirical foundations. Data for Sub-Saharan Africa reinforce this sceptical assessment. The region has embraced the financial reform paradigm, but few robust positive results have followed. On the contrary, exploratory data analysis suggests that, to the extent that financial reform has made any contribution to developmental outcomes, domestic financial development is unlikely to have been the mediating channel. We conclude that the finance–growth thesis stands challenged and outline five lessons which future research should heed. Copyright 2012 , Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/jae/ejr040
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Bibliographic Info

Article provided by Centre for the Study of African Economies (CSAE) in its journal Journal of African Economies.

Volume (Year): 21 (2012)
Issue (Month): suppl_1 (January)
Pages: -i88

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Handle: RePEc:oup:jafrec:v:21:y:2012:i:suppl_1:p:-i88

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References

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  1. Arturo Galindo & Fabio Schiantarelli & Andrew Weiss, 2005. "Does Financial Liberalization Improve the Allocation of Investment? Micro Evidence from Developing Countries," Boston College Working Papers in Economics 625, Boston College Department of Economics.
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Cited by:
  1. Conor O'Toole & Carol Newman, 2012. "Investment Financing and Financial Development: Firm Level Evidence from Vietnam," The Institute for International Integration Studies Discussion Paper Series iiisdp409, IIIS.
  2. Asongu, Simplice A, 2013. "Liberalization and financial sector competition: a critical contribution to the empirics with an African assessment," MPRA Paper 52212, University Library of Munich, Germany.
  3. Conor M. O.Toole, 2012. "Does Financial Liberalisation Improve Access to Investment Finance in Developing Countries?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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