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Financial Development and Economic Growth; An Overview

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  • Mohsin S. Khan
  • Abdelhak S Senhadji

Abstract

In recent years there has been substantial theoretical and empirical work on the role that financial markets play in fostering economic growth and development. This paper provides a selective review of the literature, as well as new empirical evidence on the relationship between financial development and economic growth for a large cross-section sample of countries. While the results indicate that the effect of financial development on growth is positive, the size of the effect varies with different indicators of financial development, estimation method, data frequency, and the functional form of the relationship.

Suggested Citation

  • Mohsin S. Khan & Abdelhak S Senhadji, 2000. "Financial Development and Economic Growth; An Overview," IMF Working Papers 00/209, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:00/209
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    References listed on IDEAS

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    1. Isard, Peter & Mathieson, Donald J. & Rojas-Suarez, Liliana, 1996. "A framework for the analysis of financial reforms and the cost of official safety nets," Journal of Development Economics, Elsevier, vol. 50(1), pages 25-79, June.
    2. van Wijnbergen, Sweder, 1983. "Credit policy, inflation and growth in a financially repressed economy," Journal of Development Economics, Elsevier, vol. 13(1-2), pages 45-65.
    3. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, pages 103-115.
    4. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, January.
    5. Dornbusch, Rudiger, 1990. "Policies to Move from Stabilization to Growth," CEPR Discussion Papers 456, C.E.P.R. Discussion Papers.
    6. Delano Villanueva & Mohsin S. Khan, 1991. "Macroeconomic Policies and Long-Term Growth; A Conceptual and Empirical Review," IMF Working Papers 91/28, International Monetary Fund.
    7. Fry, M.J., 1993. "Financial Repression and Economic Growth," Papers 93-07, University of Birmingham - International Financial Group.
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