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The Role of Finance in Economic Development: Benefits, Risks, and Politics

European Banking Center Discussion Paper No. 2011-038

CentER Discussion Paper No. 2011-041

74 Pages Posted: 20 Dec 2011 Last revised: 21 Dec 2011

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Date Written: December 19, 2011

Abstract

Theoretical and empirical research has shown that a sound and effective financial system is critical for economic development and growth. The financial system, however, is also subject to boom and bust cycles and fragility, with negative repercussions for the real economy. Further, the political structure of societies, often pre-determined by historic experience, is critical for the structure and development of the financial system. This paper is a critical survey of three related strands of literature – the finance and growth literature, the literature on financial fragility, and the politics and finance literature

Keywords: financial development, financial fragility, finance and politics, economic development, access to finance, banking crisis

JEL Classification: G0, G1, G2, O1, O4

Suggested Citation

Beck, Thorsten, The Role of Finance in Economic Development: Benefits, Risks, and Politics (December 19, 2011). European Banking Center Discussion Paper No. 2011-038. Available at SSRN: https://ssrn.com/abstract=1974471 or http://dx.doi.org/10.2139/ssrn.1974471

Thorsten Beck (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

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