n AfricaGrowth Agenda - Demystifying the nexus between financial development and economic growth

Volume 2012, Issue 4
  • ISSN : 1811-5187


The pioneering recognition of the importance of the link between financial development and per capita GDP is attributed to Schumpeter in 1934. In later years, Goldsmith (1969), McKinnon (1973) and Shaw (1973) empirically established this link showing that financial development is important for economic growth. They found the direction of causality to run from financial development to growth. Jung (1986) and subsequent researchers in the 1990s and beginning of the 21st century have built on this literature using more sophisticated modelling techniques and recent data.

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