Interaction between economic and financial development
This paper presents a possible explanation of the interactive nature of the relationship between economic and financial development based on absorption of resources by the financial sector, and constant returns to physical capital accumulation in the production sector. Financial intermediaries operating in a credit market characterised by monopolistic competition emerge along with the process of economic development. This could initially have a detrimental effect on growth, so that the economy might be trapped in a low development region. If not, subsequent economic develop-ment stimulates competition among financial intermediaries which results in more eÂ¢cient â€¦nancial transactions, and therefore higher growth. While higher eÂ¢ciency is always associated with higher growth, the laissez faire economy can still be characterised by sub-optimal levels of financial development.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Valerie R. Bencivenga & Bruce D. Smith, 1991.
"Financial Intermediation and Endogenous Growth,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 195-209.
- Bencivenga, V.R. & Smith, B.D., 1988. "Financial Intermediation And Endogenous Growth," RCER Working Papers 124, University of Rochester - Center for Economic Research (RCER).
- Khan, Aubhik, 2001. "Financial Development And Economic Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 5(03), pages 413-433, June.
- Aubhik Khan, 1999. "Financial development and economic growth," Working Papers 99-11, Federal Reserve Bank of Philadelphia.
- Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
- Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
- Saint-Paul, G., 1990. "Technological Choice, Financial Markets and Economic Development," DELTA Working Papers 90-30, DELTA (Ecole normale supérieure).
- Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
- Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
- Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
- Raghuram G. Rajan & Luigi Zingales, "undated". "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
- Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
- Levine, Ross & Loayza, Norman & Beck, Thorsten, 2000. "Financial intermediation and growth: Causality and causes," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 31-77, August.
- Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
- Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
- Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
- Gary D. Hansen & Edward C. Prescott, 1998. "Malthus to Solow," NBER Working Papers 6858, National Bureau of Economic Research, Inc.
- Gary D. Hansen & Edward C. Prescott, 1999. "Malthus to Solow," Staff Report 257, Federal Reserve Bank of Minneapolis.
- Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
- Panicos O. Demetriades & Khaled A.Hussein, 1995. "Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries," Keele Department of Economics Discussion Papers (1995-2001) 95/13, Department of Economics, Keele University.
- Bruce D. Smith & John H. Boyd, 1998. "The evolution of debt and equity markets in economic development," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(3), pages 519-560.
- John H. Boyd & Bruce D. Smith, 1995. "The evolution of debt and equity markets in economic development," Working Papers 542, Federal Reserve Bank of Minneapolis.
- anonymous, 1998. "Financial intermediation and growth," Economics Update, Federal Reserve Bank of Atlanta, issue Jan, pages 1-4.
- Deidda, Luca & Fattouh, Bassam, 2002. "Non-linearity between finance and growth," Economics Letters, Elsevier, vol. 74(3), pages 339-345, February.
- LG Deidda & B. Fattouh, 2001. "Non linearity between finance and growth," Working Paper CRENoS 200104, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Harris, Richard D. F., 1997. "Stock markets and development: A re-assessment," European Economic Review, Elsevier, vol. 41(1), pages 139-146, January.
- Zilibotti, Fabrizio, 1994. "Endogenous Growth and Intermediation in an 'Archipelago' Economy," Economic Journal, Royal Economic Society, vol. 104(423), pages 462-473, March.
- F Zilibotti, 1993. "Endogenous Growth and Intermediation in an Archipelago Economy," CEP Discussion Papers dp0167, Centre for Economic Performance, LSE.
- Sussman, Oren & Zeira, Joseph, 1995. "Banking and Development," CEPR Discussion Papers 1127, C.E.P.R. Discussion Papers.
- Gerardo della Paolera & Alan M. Taylor, 1997. "Finance and Development in an Emerging Market: Argentina and the Interwar Period," NBER Working Papers 6236, National Bureau of Economic Research, Inc.
- Gerardo della Paolera and Alan M. Taylor., 1997. "Finance and Development in an Emerging Market: Argentina in the Interwar Period," Center for International and Development Economics Research (CIDER) Working Papers C97-089, University of California at Berkeley.
- 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.
- Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
- Xu, Zhenhui, 2000. "Financial Development, Investment, and Economic Growth," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 331-344, April.
- della Paolera, Gerardo & Taylor, Alan M., 1997. "Finance and Development in an Emerging Market: Argentina in the Interwar Period," Center for International and Development Economics Research (CIDER) Working Papers 233609, University of California-Berkeley, Department of Economics. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:53:y:2006:i:2:p:233-248. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.