Financial development, growth, and poverty: how close are the links?
AbstractThe causal link between finance and growth is one of the most striking empirical macroeconomic relationships uncovered in the past decade. As this branch of the literature matures, the focus shifts from growth to other aspects of economic prosperity, and from financial depth to multidimensional measures of financial development. The author reviews the evolution of the literature and contributes by: Showing that financial depth is negatively associated with headcount poverty, even after taking account of mean income and inequality. Illustrating the pitfalls in equating financial development with financial depth. Proposing alternative measures of financial development that, though summary, capture its multidimensional nature.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3203.
Date of creation: 01 Feb 2004
Date of revision:
Payment Systems&Infrastructure; Fiscal&Monetary Policy; Economic Theory&Research; Banks&Banking Reform; Environmental Economics&Policies; Achieving Shared Growth; Governance Indicators; Economic Theory&Research; Banks&Banking Reform; Environmental Economics&Policies;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
- NEP-DEV-2004-08-16 (Development)
- NEP-FIN-2004-09-12 (Finance)
- NEP-MFD-2004-09-12 (Microfinance)
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