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.

Events

CEPR Policy Research