1. Finance, Financial Sector Policies, and Long-Run Growth
- Author
-
Demirgüç-Kunt, Asli and Levine, Ross
- Subjects
ALLOCATION OF CREDIT ,SAVINGS RATES ,PRIVATE INVESTMENT ,AMOUNT OF CAPITAL ,INFORMATIONAL ASYMMETRIES ,SHAREHOLDERS ,INFLATION ,BLACK MARKET ,FOREIGN EXCHANGES ,GOVERNMENT INTERVENTION ,CAPITAL MARKET DEVELOPMENT ,BANK DOMESTIC CREDIT ,LEGAL TRADITIONS ,FINANCIAL INTERMEDIARIES ,RETURNS ,BONDS ,PRIVATE ENTERPRISES ,FINANCIAL MARKET ,FINANCIAL SYSTEMS ,LIQUID MARKETS ,ACCOUNTING STANDARDS ,FINANCIAL MARKETS ,HOLDING ,BANK INTERMEDIATION ,DEPOSITS ,CREDITORS ,INFORMATION SYSTEMS ,CORPORATE GOVERNANCE ,DIVERSIFIED PORTFOLIOS ,STOCK MARKET CAPITALIZATION ,PURCHASING POWER ,PROPERTY RIGHTS ,ACCESS TO FINANCIAL SERVICES ,MONETARY POLICY ,CREDIT ALLOCATION ,SMALL BUSINESS ,DIVERSIFIED PORTFOLIO ,SHORT-TERM BORROWING ,GOVERNMENT POLICIES ,LONG-TERM INVESTMENTS ,CAPITAL ALLOCATION ,BANKING SYSTEMS ,CONSUMPTION EXPENDITURES ,BANKING SECTOR DEVELOPMENT ,FINANCIAL REVOLUTION ,FINANCING REQUIREMENTS ,NATIONAL STOCK EXCHANGE ,ENTREPRENEURS ,TAX SYSTEMS ,FIXED ASSETS ,PRIVATE PROPERTY ,MACROECONOMIC STABILITY ,PORTFOLIO ,NATIONAL SAVINGS ,POLITICAL ECONOMY ,RISK SHARING ,LENDERS ,LEGAL SYSTEM ,MARKET PARTICIPANTS ,MARKET SIZE ,ACCESS TO INFORMATION ,SMALL BUSINESS LENDING ,CAPITAL MARKETS ,CREDIT SCORING ,CREDITWORTHINESS ,SECURITIES MARKETS ,CAPITAL STOCK ,EXTERNAL CAPITAL ,FINANCIAL SYSTEM ,FISCAL POLICY ,EXCHANGE RATE ,FINANCIAL INSTITUTIONS ,INVESTMENT DECISIONS ,CURRENCY ,ECONOMIC POLICIES ,BOND ,GOVERNMENT SECURITIES ,PRIVATE CREDIT ,INFLATION RATES ,DUMMY VARIABLES ,PRIVATE REGISTRIES ,STOCK RETURN ,MACROECONOMIC INSTABILITY ,BANKING CRISES ,MUTUAL FUNDS ,MARKET TRANSACTION ,BANK CREDIT ,FINANCIAL DEVELOPMENT ,DEVELOPING COUNTRIES ,SECURITIES ,RISK MANAGEMENT SERVICES ,INFORMATION DISCLOSURE ,GOVERNMENT REGULATION ,LEGAL SYSTEMS ,MARKET FAILURES ,CENTRAL BANKS ,DOMESTIC EQUITIES ,INVESTMENT BANKING ,INVESTMENT FUNDS ,MARKET INTEGRATION ,ECONOMIC EFFICIENCY ,TRADING ,FINANCING OBSTACLES ,ECONOMIES OF SCALE ,LIQUIDITY RISK ,DEPOSITORS ,SUPERVISORY AGENCIES ,ECONOMIC AGENTS ,CREDIT MARKET ,FINANCIAL INSTRUMENTS ,TRANSACTION ,MINORITY SHAREHOLDERS ,CAPITAL FLOWS ,ACTIVE MARKETS ,TAX ,BANKING SYSTEM ,STOCK MARKET ,ECONOMIC GROWTH ,FAMILIES ,TRANSACTION COSTS ,EXTERNAL FINANCING ,CREDITOR ,STOCKS ,BANK LENDING ,PROPERTY RIGHTS PROTECTION ,GOVERNMENT SUBSIDIES ,INVESTING ,CAPITAL INVESTMENTS ,CORPORATE INSIDERS ,FINANCIAL CRISIS ,TRANSITION COUNTRIES ,INFLATION RATE ,SHAREHOLDER ,BANK BRANCH ,LONG-TERM CAPITAL ,POLITICAL STABILITY ,MARKET LIQUIDITY ,LACK OF CAPITAL ,ENFORCEMENT MECHANISMS ,SETTLEMENT ,RISK DIVERSIFICATION ,RISK MANAGEMENT ,CAPITAL INVESTMENT ,DEPOSIT MONEY BANKS ,INVESTMENT OPPORTUNITIES ,LENDING DECISIONS ,STOCK MARKET DEVELOPMENT ,FIXED COST ,STOCK EXCHANGES ,EXPROPRIATIONS ,COMMON LAW ,REAL INTEREST ,EXTERNAL INVESTORS ,MACROECONOMIC ENVIRONMENT ,BANKING SECTOR ,BOND MARKETS ,CREDIT RATIONING ,GROWTH OPPORTUNITIES ,OWNERSHIP STRUCTURE ,CONTRACT ENFORCEMENT ,ECONOMIC DEVELOPMENT ,CENTRAL BANK ,LONG-TERM DEBT ,MACROECONOMIC POLICIES ,OUTSIDE INVESTORS ,CAPITAL MARKET ,FISCAL DISCIPLINE ,FLOW OF INFORMATION ,NATIONAL STOCK EXCHANGES ,ACCOUNTING ,INTERNATIONAL ECONOMICS ,CAPITAL GROWTH ,MARKET DEVELOPMENT ,AGENCY PROBLEM ,CREDIT INFORMATION ,INTERNATIONAL DEVELOPMENT ,REAL INTEREST RATES ,HUMAN CAPITAL ,PRIVATE INVESTORS ,INSURANCE ,TRANSACTIONS COSTS ,TURNOVER ,BANK PROFITABILITY ,HOLDINGS ,SAVINGS RATE ,MARKET CONDITIONS ,ENFORCEMENT OF CONTRACTS ,GOVERNMENT SPENDING ,INTEREST RATE SPREADS ,INTERNATIONAL BANK ,INFORMATION ASYMMETRIES ,RATES OF RETURN ,STOCK MARKETS ,EQUITY MARKETS ,MONETARY FUND ,MICRO DATA ,FISCAL POLICIES ,PRICE MOVEMENTS ,EXTERNAL FINANCE ,ALLOCATION OF CAPITAL ,LEGAL SYSTEM ADAPTABILITY ,CAPITAL ACCUMULATION ,LIQUID ASSETS ,FINANCIAL SECTOR POLICIES ,CHECKS ,CIVIL LAW ,INTEREST RATE ,BANK = DEPOSIT - Abstract
In this paper, authors first review the literature on the relation between finance and growth. Theory provides ambiguous predictions concerning the question of whether financial development exerts a positive, causative impact on long-run economic growth. The second part of this paper reviews the literature on the historical and policy determinants of financial development. Governments play a central role in shaping the operation of financial systems and the degree to which large segments of the financial system have access to financial services. The authors discuss the relationship between financial sector policies and economic development. The remainder of the paper proceeds as follows. Sections one and two review theory and evidence on the relation between finance and growth. Section three turns to an examination of financial sector policies, and section four concludes.
- Published
- 2008