AN ESSAY ON THE INTERDEPENDENCE BETWEEN ECONOMIC GROWTH AND THE FINANCIAL SECTOR

Paulo Renatos Soares Terra

Resumo


This essay surveys the theoretical and empirical literature on the interdependence between economic growth and the financial sector. It is shown that typical financial sector
functions such as price discovery, risk sharing, and liquidity transformation have a non-trivial effect on
the growth of the real sector of the economy. Gains come mainly from reduced transactions costs as well as better allocation of resources. International empirical evidence
largely supports the proposition that more financially sophisticated countries grow at faster rates than financially
repressed ones. Nevertheless, several questions regarding the effect of financial development on economic growth remain unanswered, and several suggestions for future
research are given in the final section of the paper.

Palavras-chave


economic growth; financial sector; financial development; interdependence.

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RDE – Revista de Desenvolvimento Econômico. ISSN eletrônico 2178-8022 (números publicados a partir de 2010)
ISSN impresso 1516-1684