DP1160 Demand-Driven Financial Development

Author(s):	Gilles Saint-Paul
Publication Date:	April 1995
Keyword(s):	Crowding-Out, Deficits, Economic Growth, Financial Markets, Privatization, Saving
JEL(s):	O1
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=1160

The historical record suggests that economic development is associated with the rise of the financial sector. This rise is often triggered by exogenous events such as large budget deficits generated by wars or the availability of large investment projects such as railroads. This paper discusses the role played by such demand factors in financial development and how they favour growth.