n AfricaGrowth Agenda - Capital market development and financial development in Lesotho : some thoughts

Volume 2011, Issue 10
  • ISSN : 1811-5187


The impact of the financial sector on economic growth has been an issue of much debate (Levine, 2004). On the one hand, one view is that the financial sector has no effect on economic growth or at worst can even lead to negative growth. On the other hand, the financial sector is viewed to have a positive and significant effect on economic growth (Applegarth et. al, 2004). It is on the basis of this second view that several studies have argued for financial liberalization and financial development as the functioning of the financial system impacts positively on long-run economic growth. Financial liberalisation can be associated with issues relating to the legal and regulatory frameworks while financial development springs from the development of the financial markets (Vuranok, 2009).

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