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3 | 2012
Aid, Emerging Economies and Global Policies
Dossier | L'aide bousculée. Pays émergents et politiques globales - Revue | Évolutions des politiques de développement

Finance and Economic Development

Ugo Panizza
La finance et le développement économique


Published by Palgrave Macmillan

This chapter reviews the literature on finance and economic development. It starts with a description of the roles of finance, a definition of financial efficiency, and a discussion of whether countries may have financial sectors that are ‘too large’ compared to the size of the domestic economy. Next, the author describes several indicators of financial development and reviews the literature on the relationship between financial development and economic growth. In the literature review, he discusses in detail some recent evidence indicating that the marginal contribution of financial development to gross domestic product (GDP) growth becomes negative when credit to the private sector reaches 110 per cent of GDP. The chapter concludes with some policy conclusions targeted to developing countries.

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Electronic reference

Ugo Panizza, « Finance and Economic Development », International Development Policy | Revue internationale de politique de développement [Online], 3 | 2012, Online since 27 March 2012, connection on 21 June 2018. URL : ; DOI : 10.4000/poldev.1013

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About the author

Ugo Panizza

Chief of the Debt and Finance Analysis Unit at the Division on Globalization andDevelopment Strategies of UNCTAD and Lecturer in Econometrics and DevelopmentPolitics at the Graduate Institute of International and Development Studies, Geneva.Prior to joining UNCTAD, Mr Panizza was Senior Economist at the Inter-American Development Bank (1998–2006). He also worked for the World Bank and taught at the University of Torino and the American University of Beirut. His research interests include international finance, sovereign debt, banking, political economy and public sector labour markets.

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International Development Policy is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

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