Abstract
Abstract The paper recounts the history of the finance-growth nexus research from its origins to the yearly 1990s. The contributions are analyzed in connection with the socioeconomic context and advances in economic theory. Many ideas first expressed decades ago are still subject to constant discussions and empirical checks, for example, causality direction between finance and economic growth which appeared on the agenda in the mid-1960s. Data improvement and theoretical advances, namely, breakthroughs in the economic theory of information in conjunction with endogenous growth models and growth regressions, shaped the modern landscape of this research program in the early 1990s.
Highlights
Debates concerning the role of financial system in modern macroeconomics have intensified again
It extends earlier overviews of the topic, e.g. Levine (2005) and Ang (2008), tracking an endogenous logic of this research program, and some issues not covered in other surveys, such as finance-growth nexus in resource rich economies, and the challenges this research program is facing
The remainder of the paper is organized as follows: Section 2 describes the origins of finance-growth nexus theory up to the early 1900s; Section 3 is dedicated to its development in the first half of the XX century; in Section 4 the determinants of the rising importance of this research program in the 1950-1980s are discussed; Section 5 presents the current state of affairs, while Section 6 identifies a number of the challenges this research program is to cope with
Summary
Paper No 2012-45 | September 10, 2012 | http://www.economics-ejournal.org/economics/discussionpapers/2012-45.
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