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Financialization and Economic Growth in Developing Countries

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  • Noemi Levy-Orlik

Abstract

The impact of financialization in developing economies that have weak capital markets is explained in terms of external capital mobility that, instead of increasing financial debt and unfolding financial crisis, changed the structure of the productive sector. Exports became the main engine of economic growth, displacing fixed investment without being able to achieve external current account balances. Under these conditions, developing countries remained dependent on external capital flows, which reduced their ability to generate stable economic growth, keeping wages below those of international competitors and financial returns above international averages. It followed that internal markets dried up, labor's share of total income fell, and crises were the result of external capital outflows that were triggered by exogenous changes (higher interest rates in developed countries).

Suggested Citation

  • Noemi Levy-Orlik, 2013. "Financialization and Economic Growth in Developing Countries," International Journal of Political Economy, Taylor & Francis Journals, vol. 42(4), pages 108-127.
    • Handle: RePEc:mes:ijpoec:v:42:y:2013:i:4:p:108-127
    DOI: 10.2753/IJP0891-1916420406
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    Cited by:

    1. Ketenci, Natalya, 2017. "The Impact of the Global Financial Crisis on the Economic Development in the Eurasian Region," MPRA Paper 83780, University Library of Munich, Germany, revised 2017.
    2. Natalya Ketenci, 2015. "Economic growth and capital flow in European countries in pre and post-crisis periods," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 38(108), pages 163-180, Septiembr.
    3. Philipp A. Thompson, 2019. "Financialization and Institutional Environments," Working Papers hal-02139457, HAL.
    4. Costas Lapavitsas & Aylin Soydan, 2020. "Financialisation in developing countries: Approaches, concepts, and metrics," Working Papers 240, Department of Economics, SOAS University of London, UK.
    5. Jorge Garcia-Arias & Alan Cibils & Agostina Costantino & Vitor B. Fernandes & Eduardo Fernández-Huerga, 2021. "When Land Meets Finance in Latin America: Some Intersections between Financialization and Land Grabbing in Argentina and Brazil," Sustainability, MDPI, vol. 13(14), pages 1-37, July.

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