The Financial Sector and Economic Growth

12 Pages Posted: 8 Oct 2009


The Mankiw–Romer–Weil (1992) augmented Solow–Swan (Solow 1956; Swan 1956) model is extended to incorporate the financial sector in this study. Distinguishing between financial capital, physical capital and human capital, the research attempts to identify, in particular, the effects of financial capital on economic growth. The effects of financial sector efficiency on economic growth are also examined. The financial sector augmented model is tested on a cross-section of 35 economies. Strong support is found for the model.

Suggested Citation

Cooray, Arusha V., The Financial Sector and Economic Growth. Economic Record, Vol. 85, Issue s1, pp. S10-S21, September 2009, Available at SSRN: or

Arusha V. Cooray (Contact Author)

Embassy of Sri Lanka, Oslo ( email )


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