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Finance and development: why should causation matter?

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  • Peter Lawrence

    (Keele University, Staffordshire, UK)

Abstract

The discussion on the relationship between financial development and growth has swung from an initial consensus that financial development follows, or is at least inter-related with growth, to an almost consensual belief that sustained growth follows from financial development. This paper argues that the relationship is too complex to allow for such generalised assertions. Further, the evidence brought out in contemporary and historical research to support the new consensus is flawed. New research directions need to establish which financial policies work, especially at the micro-level, and when, and to re-focus on the issue of the role finance can play in supporting productive investment. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Peter Lawrence, 2006. "Finance and development: why should causation matter?," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(7), pages 997-1016.
    • Handle: RePEc:wly:jintdv:v:18:y:2006:i:7:p:997-1016
    DOI: 10.1002/jid.1333
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    2. Mansur, Alfan & Nizar, Muhammad Afdi, 2019. "Mengukur Perkembangan Sektor Keuangan di Indonesia dan Faktor – Faktor yang Mempengaruhi [Assessing the Measurement and Determinants of Financial Sector Development in Indonesia]," MPRA Paper 96265, University Library of Munich, Germany, revised 30 Sep 2019.
    3. Thomas Barnebeck Andersen & Sam Jones & Finn Tarp, 2012. "The Finance–Growth Thesis: A Sceptical Assessment-super- †," Journal of African Economies, Centre for the Study of African Economies, vol. 21(suppl_1), pages -88, January.
    4. Kar, Muhsin & NazlIoglu, Saban & AgIr, Hüseyin, 2011. "Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis," Economic Modelling, Elsevier, vol. 28(1-2), pages 685-693, January.
    5. Claude Berthomieu & Anastasia Ri, 2009. "Process and Effects of Financial Liberalization in Transition Countries: A Selective Literature Survey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(4), pages 453-473, December.
    6. Moder, Isabella & Bonifai, Niccolò, 2017. "Access to finance in the Western Balkans," Occasional Paper Series 197, European Central Bank.
    7. Akudugu, M. A., 2018. "The Relative Importance of Credit in Agricultural Production in Ghana: Implications for Policy and Practice," 2018 Conference (2nd), August 8-11, Kumasi, Ghana 277794, Ghana Association of Agricultural Economists.
    8. Pessoa, Filipe de Morais Cangussu & Braga, Marcelo José, 2019. "Economic growth and financial development in Brazil: a flexible regression model approach," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.

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