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Financial Development and Economic Growth: Experiences of Selected Developing Economies

Author

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  • Ahmed, Syed
  • Horner, James
  • Rafiq, Rafiqul Bhuyan

Abstract

The last two decades of the twentieth century witnessed a series of financial reforms in emerging economics of Asia, Africa and Latin America. The seminal works of R.I. McKinnon and E.S. Shaw, which attribute the slow growth of these economies to financial repression, inspired many of these reforms. The McKinnon-Shaw thesis demonstrates how government regulations cause low savings and investment, and ultimately engender financial repression. Financial liberalization, in this view, creates market-based incentives and promotes economic growth. The objectives of the paper are to (1) track financial development and critically review financial liberalization measures in the emerging economies of Brazil, Mexico, and Thailand, and (2) investigate statistically the relationship between financial development and economic growth of these economies.

Suggested Citation

  • Ahmed, Syed & Horner, James & Rafiq, Rafiqul Bhuyan, 2008. "Financial Development and Economic Growth: Experiences of Selected Developing Economies," Review of Applied Economics, Review of Applied Economics, vol. 4(1-2).
  • Handle: RePEc:ags:reapec:50014
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    References listed on IDEAS

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    6. Haramillo, Fidel & Schiantarelli, Fabio & Weiss, Andrew, 1996. "Capital market imperfections before and after financial liberalization: An Euler equation approach to panel data for Ecuadorian firms," Journal of Development Economics, Elsevier, vol. 51(2), pages 367-386, December.
    7. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    8. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    9. Enrique A Gelbard & Sérgio Pereira. Leite, 1999. "Measuring Financial Development in Sub-Saharan Africa," IMF Working Papers 99/105, International Monetary Fund.
    10. Stern, Nicholas, 1989. "The Economics of Development: A Survey," Economic Journal, Royal Economic Society, vol. 99(397), pages 597-685, September.
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