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Financial development and growth: where do we stand?

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  • Ross Levine

Abstract

In spite of the recent theoretical and empirical work that suggests that financial Systems exert a first-order, causal impact on economic growth, economists are still not very able of providing policy makers with detailed blueprints of how to create growth-promoting financial systems. The profession has only recently assembled broad cross-country data on financial structure and taken initial steps on comparing bank-based and market-based systems. This paper selectively reviews evidence on banks, markets, and financial structure. In terms of banks, the paper discusses why bans emerge, what they do, and how they affect economic performance. Next, it discusses evidence on the legal, accounting, and regulatory determinants of healthy banking development. The evidence suggests that legal and regulatory reforms that strengthen creditor rights, contract enforcement, and accounting practices boost banking sector development and accelerate economic growth. The paper next examines the impact of stock markets

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Bibliographic Info

Article provided by University of Chile, Department of Economics in its journal Estudios de Economia.

Volume (Year): 26 (1999)
Issue (Month): 2 Year 1999 (December)
Pages: 113-136

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Handle: RePEc:udc:esteco:v:26:y:1999:i:2:p:113-136

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Web page: http://www.econ.uchile.cl/
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Keywords: Financial development; growth.;

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Cited by:
  1. S Griffith-Jones (IDS, University of Sussex) and J Leape (LSE), . "Capital Flows to developing countries: does the emperor have clothes?," QEH Working Papers qehwps89, Queen Elizabeth House, University of Oxford.
  2. Claessens, Stijn & Laeven, Luc, 2002. "Financial Development, Property Rights and Growth," CEPR Discussion Papers 3295, C.E.P.R. Discussion Papers.
  3. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 2002. "Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres," CEPR Discussion Papers 3301, C.E.P.R. Discussion Papers.
  4. Abdullahi D. Ahmed, 2010. "Financial liberalization, financial development and growth linkages in Sub-Saharan African countries: An empirical investigation," Studies in Economics and Finance, Emerald Group Publishing, vol. 27(4), pages 314-339, October.
  5. Eichberger, Jürgen & Spanjers, Willy, 2007. "Liquidity and Ambiguity: Banks or Asset Markets?," Sonderforschungsbereich 504 Publications 07-18, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  6. Deidda, Luca & Fattouh, Bassam, 2008. "Banks, financial markets and growth," Journal of Financial Intermediation, Elsevier, vol. 17(1), pages 6-36, January.
  7. Matías Braun & Borja Larrain, 2005. "Finance and the Business Cycle: International, Inter-Industry Evidence," Journal of Finance, American Finance Association, vol. 60(3), pages 1097-1128, 06.
  8. Samuel Antwi & Ebenezer Fiifi Emire Atta Mills & Xicang Zhao, 2013. "Impact of Macroeconomic Factors on Economic Growth in Ghana: A Cointegration Analysis," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 35-45, January.
  9. Nicola Fuchs-Schündeln & Norbert Funke, 2003. "Stock market liberalizations: Financial and macroeconomic implications," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(4), pages 730-761, December.
  10. Chandru P. Chandrasekhar, 2007. "Financial Policies," Policy Notes 3, United Nations, Department of Economics and Social Affairs.

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