Abstract
Financial system and financial institutions does matter in economic growth. A sizeable literature has convincingly demonstrated finance-growth relationship. Numerous empirical studies provide ample support to the Schumpeters view that effective financial intermediation promotes economic growth. However, debate on finance-growth causality and the channels through which both influence each other is still very much alive. This essay reviews studies on this relationship. Empirical research suggests that financial intermediaries spur long term economic growth particularly through mobilization and allocation effect (Fry 1978; Goldsmith 1969; Levine 1993; McKinnon 1973; Shaw 1973; Schumpeter 1912). This essay substantiate finance-growth hypothesis by presenting a case study of Pakistan. Study findings support Schumpeters views on the relationship between financial development and economic growth.
| Original language | English |
|---|---|
| Pages (from-to) | 1-14 |
| Journal | Economics and Finance Review |
| Volume | 4 |
| Issue number | 7 |
| Publication status | Published - 2015 |