Finance and Growth in Developing Countries: Sound Principles and Unreliable Evidence
Financial development and economic growth are clearly related, yet the institutional channels and even the direction of causality remain unresolved theoretical issues. None the less, and despite the persistence of a wide range of organizational forms in advanced economies, strong causality from particular forms of organization of financial institutions towards rapid economic growth has become a central axiom of orthodox development economics, recently strengthened by the empirical findings of 'new institutional' economists. This chapter argues that this canonical literature is deeply flawed both methodologically and empirically. Further, the observed consequences of financial liberalisation for savings and investment on the one hand, and for macroeconomic stability on the other, suggest that an alternative interpretation of the relationship between finance and growth in developing countries is more plausible: leading to quite different policy prescriptions.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (1865) 281800
Fax: +44 (1865) 281801
Web page: http://www.qeh.ox.ac.uk/
More information through EDIRC
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.:
- Ross Levine, 2002.
"Bank-Based or Market-Based Financial Systems: Which is Better?,"
NBER Working Papers
9138, National Bureau of Economic Research, Inc.
- Levine, Ross, 2002. "Bank-Based or Market-Based Financial Systems: Which Is Better?," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 398-428, October.
- Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," William Davidson Institute Working Papers Series 442, William Davidson Institute at the University of Michigan.
- Panicos O. Demetriades & Philip Arestis, 1996.
"Financial Development and Economic Growth: Assessing the Evidence,"
Keele Department of Economics Discussion Papers (1995-2001)
96/16, Department of Economics, Keele University.
- Arestis, Philip & Demetriades, Panicos O, 1997. "Financial Development and Economic Growth: Assessing the Evidence," Economic Journal, Royal Economic Society, vol. 107(442), pages 783-99, May.
- 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.
- 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.
- 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.
- Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
- Singh, A. & Weisse, B. A., 1998.
"Emerging Stock Markets, Portfolio Capital Flows and Long-term Economic Growth: Micro and Macroeconomic Perspectives,"
Accounting and Finance Discussion Papers
98-af40, Faculty of Economics, University of Cambridge.
- Singh, Ajit & Weisse, Bruce A., 1998. "Emerging stock markets, portfolio capital flows and long-term economie growth: Micro and macroeconomic perspectives," World Development, Elsevier, vol. 26(4), pages 607-622, April.
- Jeannine Bailliu & Helmut Reisen, 1998.
"Do funded pensions contribute to higher aggregate savings? A cross-country analysis,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 134(4), pages 692-711, December.
- Jeanine Bailliu & Helmut Reisen, 1997. "Do Funded Pensions Contribute to Higher Aggregate Savings?: A Cross-Country Analysis," OECD Development Centre Working Papers 130, OECD Publishing.
- Robert S. Pindyck & Andres Solimano, 1993.
"Economic Instability and Aggregate Investment,"
NBER Working Papers
4380, National Bureau of Economic Research, Inc.
- Pindyck, Robert S. & Solimano, Andres, 1993. "Economic instability and aggregate investment," Policy Research Working Paper Series 1148, The World Bank.
- Pindyck, Robert S. & Solimano, Andrés., 1993. "Economic instability and aggregate investment," Working papers 3552-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- N. Gregory Mankiw, 1986.
"The Allocation of Credit and Financial Collapse,"
NBER Working Papers
1786, National Bureau of Economic Research, Inc.
- Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2004.
"Finance, Inequality, and Poverty: Cross-Country Evidence,"
NBER Working Papers
10979, National Bureau of Economic Research, Inc.
- Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2004. "Finance, inequality, and poverty: cross-country evidence," Policy Research Working Paper Series 3338, The World Bank.
- Ghani, Ejaz, 1992. "How financial markets affect long run growth : a cross country study," Policy Research Working Paper Series 843, The World Bank.
- Ajit Singh, 2002.
"Capital account liberalization, free long-term capital flows, financial crises and economic development,"
ESRC Centre for Business Research - Working Papers
wp245, ESRC Centre for Business Research.
- Ajit Singh, 2003. "Capital Account Liberalization, Free Long-Term Capital Flows, Financial Crises and Economic Development," Eastern Economic Journal, Eastern Economic Association, vol. 29(2), pages 191-216, Spring.
- Stiglitz, Joseph & Ocampo, Jose Antonio & Spiegel, Shari & Ffrench-Davis, Ricardo & Nayyar, Deepak, 2006. "Stability with Growth: Macroeconomics, Liberalization and Development," OUP Catalogue, Oxford University Press, number 9780199288144, March.
- Raghuram G. Rajan & Luigi Zingales, .
"Financial Dependence and Growth,"
CRSP working papers
344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Andres, Javier & Hernando, Ignacio & Lopez-Salido, J. David, 2004.
"The role of the financial system in the growth-inflation link: the OECD experience,"
European Journal of Political Economy,
Elsevier, vol. 20(4), pages 941-961, November.
- Javier Andrés & Ignacio Hernando & J. David López-Salido, 1999. "The Role of the Financial System in the Growth-Inflation Link: the OECD Experience," Banco de Espa�a Working Papers 9920, Banco de Espa�a.
- Caprio, Gerard & Honohan, Patrick, 2001. "Finance for Growth: Policy Choices in a Volatile World," MPRA Paper 9929, University Library of Munich, Germany.
- Mathieson, Donald J., 1980. "Financial reform and stabilization policy in a developing economy," Journal of Development Economics, Elsevier, vol. 7(3), pages 359-395, September.
- Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996.
"Law and Finance,"
Harvard Institute of Economic Research Working Papers
1768, Harvard - Institute of Economic Research.
- Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
- La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
- Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
- World Bank, 2001. "Finance for Growth : Policy Choices in a Volatile World," World Bank Publications, The World Bank, number 13895.
- King, Robert G & Levine, Ross, 1993.
"Finance and Growth: Schumpeter Might Be Right,"
The Quarterly Journal of Economics,
MIT Press, vol. 108(3), pages 717-37, August.
- Demirguc-Kunt, Asli & Maksimovic, Vojislav, 1995. "Stock market development and firm financing choices," Policy Research Working Paper Series 1461, The World Bank.
- Helmut Reisen, 1998. "Domestic Causes of Currency Crises: Policy Lessons for Crisis Avoidance," OECD Development Centre Working Papers 136, OECD Publishing.
- Guncavdi, Oner & Bleaney, Michael & McKay, Andrew, 1998. "Financial liberalisation and private investment: evidence from Turkey," Journal of Development Economics, Elsevier, vol. 57(2), pages 443-455.
- Michael Leahy & Sebastian Schich & Gert Wehinger & Florian Pelgrin & Thorsteinn Thorgeirsson, 2001. "Contributions of Financial Systems to Growth in OECD Countries," OECD Economics Department Working Papers 280, OECD Publishing.
When requesting a correction, please mention this item's handle: RePEc:qeh:qehwps:qehwps153. 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: (Rachel Crawford)
If references are entirely missing, you can add them using this form.