Economic growth Financial deepening

the association between economic growth , financial deepening has been wide-ranging subject of experiential research. practical evidence suggests there significant positive relationship between financial development , economic growth.

many economists support theory financial development spurs economic growth. theoretically, financial development creates enabling conditions growth through either supply-leading (financial development spurs growth) or demand-following (growth generates demand financial products) channel. large body of empirical research supports view development of financial system contributes economic growth. empirical evidence consistently emphasises nexus between finance , growth, though issue of direction of causality more difficult determine. @ cross-country level, evidence indicates various measures of financial development (including assets of financial intermediaries, liquid liabilities of financial institutions, domestic credit private sector, stock , bond market capitalisation) robustly , positively related economic growth. other studies establish positive relationship between financial development , growth @ industry level. supporters of view internal factors determine growth (endogenous growth theory) never less assign special role finance.

financial systems in developing countries became inclusive in twenty first century. however, still undiversified , small.