THE RELATIONSHIP BETWEEN FINANCE AND ECONOMIC GROWTH

• Main Author: Dumitru-Nicușor CĂRĂUȘU
• Format: Article
• Language: English
• Published: Technopress 2018-06-01
• Series: Journal of Public Administration, Finance and Law
• Subjects: finance; economic growth; methodology issues
• Online Access: http://www.jopafl.com/uploads/issue13/THE_RELATIONSHIP_BETWEEN_FINANCE_AND_ECONOMIC_GROWTH.pdf

The relationship between economic growth and the development of financial systems indicates a causal relationship, which facilitates the accumulation of resources and the development of a country. The beneficial influence of the development of the financial system, on the growth of the economy is confirmed by a whole series of studies, but the methodological issues and the tendency to report only the relevant results are some of the criticisms brought about empirical evidence. Finally, some recent theoretical developments tend to highlight that the relations between the financial system and economic growth is not precisely linear but rather it can become a limiting factor if we consider population credit. Thus, new theoretical approaches put into doubt the direct relationship between financial system development and economic growth. However, the predominant view in the economic literature points to rather beneficial relationship between financial system development and economic growth.