Financial Development, Growth, and Crisis : Is There a Trade-Off?

Loayza, Norman ; Ouazad, Amine ; Ranciere, Romain

World Bank, Washington, DC

关键词: FINANCE;    DEVELOPMENT;    ECONOMIC GROWTH;    PRODUCTIVITY;    ECONOMIC SHOCKS;   

DOI  :  10.1596/1813-9450-8237
RP-ID  :  WPS8237

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper reviews the evolvingliterature that links financial development, financialcrises, and economic growth in the past 20 years. Theinitial disconnect -- with one literature focusing on theeffect of financial deepening on long -- run growth andanother studying its impact on volatility and crisis—hasgiven way to a more nuanced approach that analyzes the twophenomena in an integrated framework. The main finding ofthis literature is that financial deepening leads to atrade-off between higher economic growth and higher crisisrisk; and its main conclusion is that, for at leastmiddle-income countries, the positive growth effectsoutweigh the negative crisis risk impact. This balanced viewhas been revisited recently for advanced economies, where anemerging and controversial literature supports the notion of"too much finance," suggesting that there might bea threshold beyond which financial depth becomes detrimentalfor economic growth by crowding out other productiveactivities and misallocating resources. Nevertheless, thegrowth/crisis trade-off is alive and strong for a largeshare of the world economy. Recognizing the intrinsictrade-offs of financial development can provide a usefulframework to design policies targeting financial deepening,diversity, and inclusion. In particular, acknowledging thetrade-offs can highlight the need for complementary policiesto mitigate the risks, from financial macroprudentialpolicies to monetary policy frameworks that monitor thegrowth of credit and asset prices.