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The Positive Impact Of Economic Growth And Financial Growth

1558 Words7 Pages

Economic growth is the most dominant channel for minimizing poverty and refining the standard of life in developing countries. In late years the association between economic growth and financial development has become a matter of large examination. On exchange of views, the nature of casualty between the two was acknowledged. In contrast, a common concept expresses that the development of the financial sector is anticipated to have a positive impact on economic growth. Equally, there is a sequence succeeding the opinion which states that economic growth encouraged the progress of the financial sector. Robinson (1952) suggested that financial development is followed by economic growth and financial development itself is not a chief element to growth (Nelson and Ramesh, 2009). Whereas, Schumpeter (1911) contended that financial intermediation by banking system played a central part in economic development by exerting an influence on the assignment of savings, enhancing the efficiency, technical reform and the rate of economic growth. The majority of these studies are unified almost on the existence of a significant positive effect of financial development on growth. In spite of the many empirical investigations into the influence of financial development on growth, there is still a lack of empirical research into how a more developed financial sector contributes to poverty reduction. World Bank (2001b) recognizes three pivotal areas for acquiring the effect of

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