Thorsten Beck, Steven Poelhekke, 26 February 2017

The financial sector plays a critical role in intermediating domestic savings into domestic investment, so it should serve as an important absorption tool for natural resource windfalls. Using a panel dataset of over 150 developed and developing countries, this column argues that unexpected exogenous windfalls from natural resource rents are not intermediated. The findings are consistent with the negative long-term relationship between the reliance of a country on natural resources and financial sector development.

Zoltan Pozsar, 07 November 2013

Modern banks operate in a complex global financial ecosystem. This column argues that proper regulation requires an updating of our ideas about how they operate. Modern banks finance bond portfolios with uninsured money market instruments, and thus link cash portfolio managers and risk portfolio managers. Gone are the days when banks linked ultimate borrowers with ultimate savers via loans and deposits. The Flow of Funds should be updated to reflect the new realities.

Thorsten Beck, Hans Degryse, Christiane Kneer, 08 April 2013

Growing the financial sector was viewed as a viable 21st-century competitiveness policy for small, agile nations in the 2000s. Things have changed. This column reviews the empirical literature arguing for a distinction between two roles: finance as intermediation or facilitator, and finance as a growth sector in itself. Evidence suggests that, for rich nations, finance stimulates growth but makes it more volatile, whereas for developing nations its function as a facilitator raises long-term growth and reduces volatility.

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