The Finance-Growth Thesis: A Sceptical Assessment

Thomas Barnebeck Andersen; Edward Samuel Jones; Finn Tarp

doi:10.1093/jae/ejr040

The Finance-Growth Thesis: A Sceptical Assessment

Thomas Barnebeck Andersen, Edward Samuel Jones, Finn Tarp

10 Citations (Scopus)

Abstract

Financial liberalisation is widely seen as key to promoting financial development and unlocking growth in developing countries. While this thesis has been backed by an extensive literature, we show that it rests on weak theoretical and empirical foundations. Data for Sub-Saharan Africa reinforce this sceptical assessment. The region has embraced the financial reform paradigm, but few robust positive results have followed. On the contrary, exploratory data analysis suggests that, to the extent that financial reform has made any contribution to developmental outcomes, domestic financial development is unlikely to have been the mediating channel. We conclude that the finance-growth thesis stands challenged and outline five lessons which future research should heed.

Original language	English
Journal	Journal of African Economies
Volume	21
Issue number	AERC Supplement 1
Pages (from-to)	i57–i88
ISSN	0963-8024
DOIs	https://doi.org/10.1093/jae/ejr040
Publication status	Published - Jan 2012

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Faculty of Social Sciences

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title = "The Finance-Growth Thesis: A Sceptical Assessment",

abstract = "Financial liberalisation is widely seen as key to promoting financial development and unlocking growth in developing countries. While this thesis has been backed by an extensive literature, we show that it rests on weak theoretical and empirical foundations. Data for Sub-Saharan Africa reinforce this sceptical assessment. The region has embraced the financial reform paradigm, but few robust positive results have followed. On the contrary, exploratory data analysis suggests that, to the extent that financial reform has made any contribution to developmental outcomes, domestic financial development is unlikely to have been the mediating channel. We conclude that the finance-growth thesis stands challenged and outline five lessons which future research should heed.",

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T2 - A Sceptical Assessment

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AU - Jones, Edward Samuel

AU - Tarp, Finn

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PY - 2012/1

Y1 - 2012/1

N2 - Financial liberalisation is widely seen as key to promoting financial development and unlocking growth in developing countries. While this thesis has been backed by an extensive literature, we show that it rests on weak theoretical and empirical foundations. Data for Sub-Saharan Africa reinforce this sceptical assessment. The region has embraced the financial reform paradigm, but few robust positive results have followed. On the contrary, exploratory data analysis suggests that, to the extent that financial reform has made any contribution to developmental outcomes, domestic financial development is unlikely to have been the mediating channel. We conclude that the finance-growth thesis stands challenged and outline five lessons which future research should heed.

AB - Financial liberalisation is widely seen as key to promoting financial development and unlocking growth in developing countries. While this thesis has been backed by an extensive literature, we show that it rests on weak theoretical and empirical foundations. Data for Sub-Saharan Africa reinforce this sceptical assessment. The region has embraced the financial reform paradigm, but few robust positive results have followed. On the contrary, exploratory data analysis suggests that, to the extent that financial reform has made any contribution to developmental outcomes, domestic financial development is unlikely to have been the mediating channel. We conclude that the finance-growth thesis stands challenged and outline five lessons which future research should heed.

KW - Faculty of Social Sciences

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DO - 10.1093/jae/ejr040

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SP - i57–i88

JO - Journal of African Economies

JF - Journal of African Economies

IS - AERC Supplement 1

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The Finance-Growth Thesis: A Sceptical Assessment

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