Abstract
Over the last two decades several countries experienced currency crises. These were characterized both by a huge disruption of economic activity and an extreme speed of diffusion within countries. The financial turmoil happened in a period of very high degree of international financial integration. As a result financial liberalization was associated with greater incidence of crises and this brought an intense debate in both academic and policy circles about the consequences of free capital movements. In this paper we aim to check the existence and the strength of credit channel and balance sheet effects in countries characterized by an intermediate level of financial development. A huge literature exists about the topic concerning the role that credit market and financial development play on the real activity. The paper empirically examines the dynamic relationship between financial development and economic growth. A time-series approach using the VAR Model has been used to provide an assessment of empirical evidence on the effects of financial development on macroeconomic volatility.
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